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The Watertech corporation has a new technology that allows underground storage (and retrieval) of water at very low cost. Its initial investment involves a

The Watertech corporation has a new technology that allows underground storage (and retrieval) of water at very low cost. Its initial investment involves a 200 million dollars investment to capture the storm runoff from the San Gabriel mountains. 6.A. 2pts. Why might Dr Perrier, the firm CEO, buy an option to acquire land in the San Bernardino mountains? 6.B. 2pts. There is a futures market for water in California. What side of the market does Dr Perrier enter (long or short) and why. 6.C 3 pts. The city of Pasadena has an allocation of water from the Colorado River and is the first client of Waterwise. How might it use options to hedge the risk that Waterwise and Dr Perrier fail?

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