You have an exclusive contract to supply oranges to Juice&Co. and you are expected to deliver 10,000 oranges in one year from now at the market price in place at that time. Your production cost to farm and harvest the 10,000 oranges will be $2,000 in one year. Todays market price for one orange is $0.52. Assume that the continuously compounded risk free interest rate is 6%. You expect the price of oranges to be between $0.50 and $0.55 next year, and you have decided to hedge your risk using one year European options: you buy 10,000 put options with strike price $0.52 for $84 (per option) and sell 10,000 call options with strike price $0.54 for $74 (per option). a) What is the total cost of your options portfolio? b) Determine the range of possible net profits you can get from your supply contract and options portfolio one year from now. Show your work in detail.

Please show all work. I only need part B

Part A Consider the following securities and market prices: Security Maturity (years) Apple stock - Put on Apple stock 1 Call on Apple stock 1 Strike . $90 $90 Price (today) 995 S10 ? The continuously compounded annual risk-free interest rate is 2% and there are no transaction costs. a) What should be the price of the call option? b) Assume that the call option on Apple with strike price $90 and maturity in one year is currently trading at $17. You immediately tell your broker that you found a different price in part (a), but he replies that you must be wrong markets should be efficient and the price you computed in point (1) is useless. Do you agree with him or not? Construct an arbitrage portfolio to support your answer. c) Assume now that there is a trading fee of 8 cents per option or per stock you buy/sell. Would your answer to part (b) change? Part B You have an exclusive contract to supply oranges to Juice&Co. and you are expected to deliver 10,000 oranges in one year from now at the market price in place at that time. Your production cost to farm and harvest the 10,000 oranges will be $2,000 in one year. Today's market price for one orange is $0.52. Assume that the continuously compounded risk free interest rate is 6% You expect the price of oranges to be between $0.50 and $0.55 next year, and you have decided to hedge your risk using one year European options: you buy 10,000 put options with strike price 50.52 for 584 (per option) and sell 10,000 call options with strike price $0.54 for $74 (per option). a) What is the total cost of your options portfolio? b) Determine the range of possible net profits you can get from your supply contract and options portfolio one year from now. Show your work in detail. Part A Consider the following securities and market prices: Security Maturity (years) Apple stock - Put on Apple stock 1 Call on Apple stock 1 Strike . $90 $90 Price (today) 995 S10 ? The continuously compounded annual risk-free interest rate is 2% and there are no transaction costs. a) What should be the price of the call option? b) Assume that the call option on Apple with strike price $90 and maturity in one year is currently trading at $17. You immediately tell your broker that you found a different price in part (a), but he replies that you must be wrong markets should be efficient and the price you computed in point (1) is useless. Do you agree with him or not? Construct an arbitrage portfolio to support your answer. c) Assume now that there is a trading fee of 8 cents per option or per stock you buy/sell. Would your answer to part (b) change? Part B You have an exclusive contract to supply oranges to Juice&Co. and you are expected to deliver 10,000 oranges in one year from now at the market price in place at that time. Your production cost to farm and harvest the 10,000 oranges will be $2,000 in one year. Today's market price for one orange is $0.52. Assume that the continuously compounded risk free interest rate is 6% You expect the price of oranges to be between $0.50 and $0.55 next year, and you have decided to hedge your risk using one year European options: you buy 10,000 put options with strike price 50.52 for 584 (per option) and sell 10,000 call options with strike price $0.54 for $74 (per option). a) What is the total cost of your options portfolio? b) Determine the range of possible net profits you can get from your supply contract and options portfolio one year from now. Show your work in detail