A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,350 an ounce, but the price is extremely volatile and could fall as low as $1,250 or rise as high as $1,450 in the next month. The company will bring 1,150 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) $1,250, (ii) $1,350, and (iii) $1,450 an ounce? b. The futures price of gold for delivery 1 month ahead is $1,360. What will be the firm's total revenues if the firm enters into a 1-month futures contract to deliver 1,150 ounces of gold? c. What will be the total revenues if the firm buys a 1-month put option to sell gold for $1,150 an ounce? The put option costs $33 per ounce.

A gold-mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1,350 an ounce, but the price is extremely volatile and could fall as low as $1,250 or rise as high as $1,450 in the next month. The company will bring 1,150 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) $1,250, (ii) $1,350, and (iii) $1,450 an ounce? b. The futures price of gold for delivery 1 month ahead is $1,360. What will be the firm's total revenues if the firm enters into a 1-month futures contract to deliver 1,150 ounces of gold? c. What will be the total revenues if the firm buys a 1-month put option to sell gold for $1,150 an ounce? The put option costs $33 per ounce.

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

See similar textbooks

Similar questions

Please don't give image based answer ..thanku
When you logged on to your brokerage account this morning, you saw that the Brazil Real is trading at 50.2970. Gold is trading at $200 per ounce. You have $10,000 to invest, and you think you might be able to make arbitrage profits in the gold market. How many Reals could you buy at the posted price? How much gold could you buy at the dollar price in the gold market? What would the gold be worth if the Real price is 750 BRL per ounce? If the Real price for gold is 750 BRL per ounce, how would you make arbitrage profits? How much would you make with your $10,000 investment?
None
Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 8% per year. If Do $5 and rs = 17%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent. $
None
A risky $420,000 investment is expected to generate the following cash flows: Year 1 2 3 4$ 102,700 $ 163,030 $ 160,824 $ 135,200 If the firm’s cost of capital is 12 percent, should the investment be made?. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar.NPV: $ Should The investment be made? An alternative use for the $420,000 is a four-year U.S. Treasury bond that pays $25,200 annually and repays the $420,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 70 percent of the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. NPV: $ Should The investment be made?
Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm’s total corporate value (in millions)? Do not round intermediate calculations. Year 1 2 Free Cash flow -$30 $195 a. $3,413 million b. $2,901 million c. $3,044 million d. $2,743 million e. $2,643 million
Amazing Co. is entering into a 3-year remodeling and expansion project. The constructionwill have a limiting effect on earnings during that time, but when it is complete, it shouldallow the company to enjoy much improved growth in earnings and dividends. Last year, thecompany paid a dividend of $3.40. It expects zero growth in the next year. In years 2 and 3,5% growth is expected, and in year 4, 15% growth. In year 5 and thereafter, growth shouldbe a constant 10% per year. What is the maximum price per share that an investor whorequires a return of 14% should pay for Amazing Co.’s ordinary share?
HJK Corporation's demand for cash during a year's time is $500,000. Each time HJK sells securities to raise cash, it pays a brokerage commission of $10. The interest rate HJK earns on the securities is 4% per year 9 How much in securities should HJK sell I each time it sells securities to minimize its costs of holding the cash instead of the securities and to minimize its brokerage commissions? *
Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 9% per year. If D0 = $5 and rs = 14%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent.
A small company owns an oil well. Initially revenues and dividends are expected to grow while the oilwell is being developed. It is then expected to slowly decline as it dries up until it shuts down.An annual dividend of $1.80 has just been paid. Dividends are expected to grow by 15% p.a. until t=6.Dividends are then expected to decline by 1.5% p.a. until t=25 when the well is expected to shut down.a. What is the dividend expected to be in 12 year’s time? b. What is the share price today if the shares are priced at 11.5% p.a.?
Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 3% per year. If D0 = $3 and rs = 13%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent. $ ?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS