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a . What will total revenues be if the firm remains unhedged for gold prices of $900 , $1, 050 , and $ 1, 200 an QUINCE' ?" Gold price $900 $1,

A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,050 an ounce, but the price is extremely volatile and could fall as low as $900 or rise as high as $1,200 in the next month. The company will bring $2,000 ounces to the market next month.

Screen Shot 2019-04-01 at 9.19.27 PM.png

Screen Shot 2019-04-01 at 9.19.27 PM.png

a . What will total revenues be if the firm remains unhedged for gold prices of $900 , $1, 050 , and $ 1, 200 an
QUINCE' ?"
Gold price
$900
$1, 050
$1, 200
Total revenues
$1 , 800, 000 0
$21 , 003 , 000 13
$2, 400, 000 0
b . The futures price of gold for 1 - month - ahead delivery is $1 , 060 . What will be the firm's total revenues at
each gold price if the firm enters a 1 - month futures contract to deliver $2, 000 ounces of gold ?
Gold price
$900
$1, 050
$1, 200
Total revenues
$2, 120, 000 0
$2, 120, 000 0
$2, 120, 000 0
C. What will total revenues be if the firm buys a 1 - month put option to sell gold for $ 1, 050 an ounce ? The
puts cost $8 per ounce .
Gold price
$900
$1, 050
$1, 200
Total revenues
$2, 100, 000 13
$2, 100, 000 13
$2, 400, 000 0

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