A Gold-Mining firm is concerned about short-term volatility in its revenues. Gold currently sells for $1500 an ounce, but the price is extremely volatile and could fall as low as $1410 or rise as high as $1580 in the next month. The company will bring 1000 ounces of gold to market next month.

a) What hedging strategy should the firm take if it wishes to use the gold futures contract (100 ounces per contract) to hedge the risk exposure? Evaluate how the hedging strategy works.

b) Suppose that the future price of gold for delivery 1 month ahead is $1520, what will be the firm's total revenues if it takes the hedging strategy as per your answer to (a).