1) A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023. It has concern about silver gold price may decline over the next several months. Silver price today is $23.5 per oz; the futures price for December 2023 delivery is $24.0 per ounce. Each silver contract is 5000 oz. silver. Question: 1) How many silver contacts it will need to sell to hedge the price thru year end 2023? 2) If at year end 2023, silver price declines to $23 per oz., calculate and see how the hedge works.
1) A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023. It has concern about silver gold price may decline over the next several months. Silver price today is $23.5 per oz; the futures price for December 2023 delivery is $24.0 per ounce. Each silver contract is 5000 oz. silver. Question: 1) How many silver contacts it will need to sell to hedge the price thru year end 2023? 2) If at year end 2023, silver price declines to $23 per oz., calculate and see how the hedge works.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1) A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023. It has concern about silver gold price may decline over the next several months. Silver price today is $23.5 per oz; the futures price for December 2023 delivery is $24.0 per ounce. Each silver contract is 5000 oz. silver.
Question:
1) How many silver contacts it will need to sell to hedge the price thru year end 2023?
2) If at year end 2023, silver price declines to $23 per oz., calculate and see how the hedge works.
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