Question
A New Zealand company produces 20,000 ounces of gold per year. It uses 30% of its production for making gold jewelry sold at a fixed
A New Zealand company produces 20,000 ounces of gold per year. It uses 30% of its production for making gold jewelry sold at a fixed price through stores in Australia and New Zealand, and the rest is sold on the market, where the gold price is determined in US dollars. Australias profits are repatriated to New Zealand. The companys CEO wants to use futures contractc to hedge the entire production. He calls you to seeks your opinion. Recommend a seinsble hedge stragtegy that would be in line with the CEOs wishes (assume x is the quantity used for making gold jewelry in the New Zealand)
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