FIN 4250 Is the commodity swap, based on a one year payment date, as described in the case

1. Is the commodity swap, based on a one year payment date, as described in the case, a reasonable strategy for Valley Quarry to pursue? Is there a better alternative, if so what is it?2. What is the cost or risk to Valley Quarry if block granite and silica prices are not perfectly correlated?3. Discuss the effect upon the relative position of the two companies of there is a movement, up or down, of the prices of block granite.4. Assuming the broker uses the average spot price if the two commodities to set the price for each counterparty, what will be the net payment, positive or negative, to each? Due to a swap arrangement was finalized the spot price for silica is now less than $30 per ton. Southern Builders had agreed to pay a fixed price of $30 per ton got silica. Valley Quarry will receive $38 per ton block granite. How much will Valley Quarry pay for granite? How much will Southern Builders receive for silica? How much will it pay for granite?5. Describe, without calculations, what is taking place in the swap arrangement. A diagram would be useful in this regard.6. What is the importance of the more widely traded commodity, silica, being considered as the futures contract for Southern Builders, Inc.?7. in your opinion, are commodity prices likely more volatile than other types of assets that may fit a swap arrangement, such as equities or financial assets? Why or why not?