2. Futures for Speculations (12.5 marks) In addition to risk management purposes, futures contracts can also be used to adjust the economic exposure with- out liquidating/altering the original position(s) in the market. Rei is an investor with a long position of 1,250 ounces of gold. The spot prices for gold and copper, as at 3 March 2020, are US$1,604.5/ounce and US$2.5442/pound, re- spectively. (a) Calculate the value of the Rei's holding in gold as at 3 March 2020. (b) Rei expects that over the next three months copper will outperform gold; however she does not wish to close her long term physical position, i.e. she does not want to sell the gold that she holds in her portfolio. One possible strategy for Rei is to modify her market exposure by entering different positions in gold futures and copper futures. In addition, Rel wants the futures position to best match her original gold position. The specifications of the futures contracts are stated as follows: Contract Delivery Price Contract Unit Copper Jun2020 US$2.5673/pound 25,000 pounds Gold - Jun2020 US$1,610.0/ounce 100 ounces State clearly how Rei can enter different positions into these contracts to execute her speculation of steeper price appreciation for copper without affecting her physical gold holding. () Suppose, when both the contracts mature in June, the prices for both gold and copper increase, but copper indeed outperforms gold, with the copper spot price rising 15.3% compared the gold spot price growth of 3.7%. Calculate the the net gain/loss of her combined positions with an assumption that there is no transaction cost