A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $2,100 an ounce, but the price is extremely volatile and could fall as low as $2,000 or rise as high as $2,200 in the next month. The company will bring 1,400 ounces of gold to the market next month. a. What will be the total revenues if the firm remains unhedged for gold prices of (1) $2,000, (ii) $2,100, and (ii) $2,200 an ounce? i. At $2,000 an ounce ii. At $2,100 an ounce iii. At $2,200 an ounce b. The futures price of gold for delivery 1 month ahead is $2,090. What will be the firm's total revenues if the firm enters into a 1-month futures contract to deliver 1,400 ounces of gold? Total revenues
A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $2,100 an ounce, but the price is extremely volatile and could fall as low as $2,000 or rise as high as $2,200 in the next month. The company will bring 1,400 ounces of gold to the market next month. a. What will be the total revenues if the firm remains unhedged for gold prices of (1) $2,000, (ii) $2,100, and (ii) $2,200 an ounce? i. At $2,000 an ounce ii. At $2,100 an ounce iii. At $2,200 an ounce b. The futures price of gold for delivery 1 month ahead is $2,090. What will be the firm's total revenues if the firm enters into a 1-month futures contract to deliver 1,400 ounces of gold? Total revenues
Chapter14: Capital Structure Management In Practice
Section: Chapter Questions
Problem 27P
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![A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $2,100 an ounce, but the
price is extremely volatile and could fall as low as $2,000 or rise as high as $2,200 in the next month. The company will
bring 1,400 ounces of gold to the market next month.
a. What will be the total revenues if the firm remains unhedged for gold prices of (i) $2,000, (ii) $2,100, and (iii) $2,200 an
ounce?
i.
At $2,000 an ounce
ii.
At $2,100 an ounce
ii.
At $2,200 an ounce
b. The futures price of gold for delivery 1 month ahead is $2,090. What will be the firm's total revenues if the firm enters
into a 1-month futures contract to deliver 1,400 ounces of gold?
Total revenues](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F070cca26-a62e-4ff5-8db1-2d32fcf8790c%2F75f77aac-629e-4133-b446-bad31c9e6e65%2Fqwyx4uq_processed.png&w=3840&q=75)
Transcribed Image Text:A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $2,100 an ounce, but the
price is extremely volatile and could fall as low as $2,000 or rise as high as $2,200 in the next month. The company will
bring 1,400 ounces of gold to the market next month.
a. What will be the total revenues if the firm remains unhedged for gold prices of (i) $2,000, (ii) $2,100, and (iii) $2,200 an
ounce?
i.
At $2,000 an ounce
ii.
At $2,100 an ounce
ii.
At $2,200 an ounce
b. The futures price of gold for delivery 1 month ahead is $2,090. What will be the firm's total revenues if the firm enters
into a 1-month futures contract to deliver 1,400 ounces of gold?
Total revenues
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