Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

1a. A gold mining firm that produces gold will have gold ready for sale and deli

ID: 2620204 • Letter: 1

Question

1a. A gold mining firm that produces gold will have gold ready for sale and delivery in 6 months from now, but expects or forecasts that prices will fall within the next 6 months and would like to lock into the current price as closely as possible to manage its revenue and operating profit margin. Set up a trading strategy using futures contracts only considering the information provided in table below:

Time

Cash Market Price of Gold per unit

Futures Market Price of Gold per unit

Now

$1223 Cash or Spot price

$ 1225 Futures price

Later:6 months from now

$1219 Cash or Spot price

$1221 Futures price

Show your work and actions in table below

Time

Actions in the cash or spot market

Actions in the futures market

Now

Later: 6 months from now

Results

Show the combined results of your actions and calculate the net, actual, final result in dollars per unit to the gold producer below here.

1a. A gold mining firm that produces gold will have gold ready for sale and delivery in 6 months from now, but expects or forecasts that prices will fall within the next 6 months and would like to lock into the current price as closely as possible to manage its revenue and operating profit margin. Set up a trading strategy using futures contracts only considering the information provided in table below:

Time

Cash Market Price of Gold per unit

Futures Market Price of Gold per unit

Now

$1223 Cash or Spot price

$ 1225 Futures price

Later:6 months from now

$1219 Cash or Spot price

$1221 Futures price

Explanation / Answer

Actions in the cash

or spot market

Actions in the future

market

Time

Actions in the cash

or spot market

Actions in the future

market

Now Go short Go short 6 months from now buy buy Results 1223 - 1219 = $4 gain per unit 1225 - 1221 = $4 gain per unit
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
Chat Now And Get Quote