A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for...

A gold mining firm is concerned about short-term volatility in its revenues. Gold currently sells for...

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A gold mining firm is concerned about short-termvolatility in its revenues. Gold currently sells for $1,620 anounce, but the price is extremely volatile and could fall as low as$1,500 or rise as high as $1,700 in the next month. The companywill bring $4,000 ounces to the market next month.

a. What will total revenues be if the firm remainsunhedged for gold prices of $1,500, $1,620, and $1,700 anounce?

Gold price
$1,500 $1,620 $1,700
  Total revenues $ $ $

b. The futures price of gold for 1-month-aheaddelivery is $1,630. What will be the firm’s total revenues at eachgold price if the firm enters a 1-month futures contract to deliver$4,000 ounces of gold?

       Goldprice
$1,500 $1,620 $1,700
  Total revenues $ $ $

c. What will total revenues be if the firm buys a1-month put option to sell gold for $1,620 an ounce? The puts cost$8 per ounce.

Gold price
$1,500 $1,620 $1,700
  Total revenues $ $ $

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a b futures price of gold for 1monthahead delivery is1630Therefore no matter what the gold prices are the firm See Answer

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A gold mining firm is concerned about short-termvolatility in its revenues. Gold currently sells for $1,620 anounce, but the price is extremely volatile and could fall as low as$1,500 or rise as high as $1,700 in the next month. The companywill bring $4,000 ounces to the market next month. a.What will total revenues be if the firm remainsunhedged for gold prices of $1,500, $1,620, and $1,700 anounce? Gold price$1,500$1,620$1,700 Total revenues

$ b . T h e f u t u r e s p r i c e o f g o l d f o r 1 - m o n t h - a h e a d d e l i v e r y i s $ 1, 630. W h a t w i l l b e t h e f i r m^{'} s t o t a l r e v e n u e s a t e a c h g o l d p r i c e i f t h e f i r m e n t e r s a 1 - m o n t h f u t u r e s c o n t r a c t t o d e l i v e r $ 4, 000 o u n c e s o f g o l d ? G o l d p r i c e $ 1, 500 $ 1, 620 $ 1, 700 T o t a l r e v e n u e s

$ c.What will total revenues be if the firm buys a1-month put option to sell gold for $1,620 an ounce? The puts cost$8 per ounce.Gold price$1,500$1,620$1,700 Total revenues$$$

	Gold price
	$1,500	$1,620	$1,700
Total revenues	$	$	$

Goldprice

$1,500

$1,620

$1,700

Total revenues

A gold mining firm is concerned about short-termvolatility in its revenues. Gold currently sells for $1,620 anounce, but the price is extremely volatile and could fall as low as$1,500 or rise as high as $1,700 in the next month. The companywill bring $4,000 ounces to the market next month.

a.	What will total revenues be if the firm remainsunhedged for gold prices of $1,500, $1,620, and $1,700 anounce?

		Gold price
		$1,500	$1,620	$1,700
	Total revenues	$	$	$


b.	The futures price of gold for 1-month-aheaddelivery is $1,630. What will be the firm’s total revenues at eachgold price if the firm enters a 1-month futures contract to deliver$4,000 ounces of gold?