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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' ?&quot; 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.

a . What will total revenues be if the firm remains unhedged for gold prices of \$900 , \$1, 050 , and \$ 1, 200 an
QUINCE' ?&quot;
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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