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The Elder Scrolls III: Morrowind Hints
The Shipwreck 'Prelude'
1 of 5: Arethi will tell you about a wrecked ship named the Prelude that has a valuable Daedric wakizashi on it.
2 of 5: The shipwreck is at location 22 on the Bal Fell map.
3 of 5: There isn't much in it, though there are a couple of monsters to fight, which is kind of rare for a shipwreck.
4 of 5: The wakizashi is in a trapped chest down in the lower level of the ship.
5 of 5: Once you have it, return to Arethi to turn it over and get 500 gold. (Or keep it for yourself and forget about the quest, if you like. It's a great one-handed short blade.)