assume an effective monthly interest rate of 1% unless otherwise indicated in the problem.

4. Barrick Gold Inc., an operator of several gold mines, incurs costs totaling $850 to produce one ounce of gold. Assume all of the costs are fixed costs with respect to the spot price of gold. Barrick is considering two strategies to hedge its profits: (a) Buy a put with K = 1400, T = 1, costing premium of $30. (b) Write a call with K = 1800, T = 1, receiving premium of $50. For what range of spot gold prices will strategy (b) give Barrick a higher profit than strategy (a)? (Hint: start by graphing the two hedged profit functions.) (20 points)