A gold-mining firm is concerned about short-term volatility in
its revenues. Gold currently sells for $1,150 an ounce, but the
price is extremely volatile and could fall as low as $1,070 or rise
as high as $1,230 in the next month. The company will bring 1,000
ounces to the market next month. (Enter your answers
in millions rounded to 2 decimal places.)
- A Gold Mining Firm Is Concerned About Short Term Volatility In Its Revenues Gold Currently Sells For 1 150 An Ounce B 1 (56.5 KiB) Viewed 23 times
6 a. What will be total revenues if the firm remains unhedged for gold prices of $1,070, $1,150, and $1,230 an ounce? Gold Price per Total Revenue Ounce $ 1,070 million $ 1,150 million $ 1,230 million b. The futures price of gold for delivery one month ahead is $1,300. What will be the firm's total revenues at each gold price if the firm enters into a one-month futures contract to deliver 1,000 ounces of gold? Gold Price per Ounce Total Revenue $ 1,070 million $ 1,150 million $ 1,230 million c. What will total revenues be if the firm buys a one-month put option to sell gold for $1,150 an ounce? The put option costs $120 per ounce. Gold Price per Ounce Total Revenue $ 1,070 $ 1,150 $ 1,230 million million million