The COVID-19 pandemic has caused the global economy to swing in either direction with the discovery of more virus variants. Firm A operates a number of petrochemical plants worldwide. In May 2021, Firm A has an alternative to buy or not to buy from Firm B, 1 million barrels of crude oil for $55 per barrel on 31st December 2021. This alternative costs $0.40 per barrel. Required: i. ii. III. Explain the option positions undertaken by the two firms and each firm's objective in their respective positions. Compute Firm A's net purchase cost of crude oil if the spot price on 31st December 2021 turned out to be $50 per barrel. Compute the net gain / loss to Firm B if the spot price on 31st December 2021 turned out to be $60 per barrel. iv. Sketch a fully-labelled net profit diagram showing the two firm's positions. V. 21 21 Critically discuss the differences to Firm A if it were to commit to a forward contract on crude oil at the forward price of $55 per barrel.