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Choco Inc. buys chocolate from Switzerland and resells it in theU.S. It just purchased chocolate invoicedat SF50,000. Payment for the invoice is due in 30 days. Assume thatthe current exchange rate of theSwiss franc is $1.00. Also assume that three call options for thefranc are available. The first option has astrike price of $1.00 and a premium of $.03; the second option hasa strike price of $1.03 and a premiumof $.01; the third option has a strike price of $1.06 and a premiumof $.005. Choco Inc. expects a modestappreciation in the Swiss franc.a) (5 points) Describe how Choco Inc. could construct a bullspreadusing the first two options. What isthe cost of this hedge? When is this hedge most effective? When isit least effective?b) (5 points) Describe how Choco Inc. could construct a bullspreadusing the first and the third options.What is the cost of this hedge? When is this hedge most effective?When is it least effective?c) (5 points) Given your answers to parts (a) and (b), what is thetradeoff involved in constructing abullspread using call options with a higher exercise price?