Q1. On NOV 22, 2019 a Gold Trader (GT) entered several contracts as follows:

Contract 1: GT will purchase 100,000 ounces of gold from a Gold Mining Company (GMC) on MAR 14, 2020 for the spot price on that day.

Contract 2: GT will sell 100,000ounces of gold on MAR 14, 2020 to Gold Jewelry Designer (GJD). The selling price will be the NOV 22, 2019 NYMEX gold futures price for APR 2020 delivery MINUS a discount of $4/ounce (or more). The discount is yet to be agreed upon between GT and GJD.

Contract 3: GT opened a hedge on NYMEX to hedge the gold purchase from GMC using

1,000 NYMEX APR 2020 gold futures. Every NYMEX gold futures covers 100ounces.

A. show a time table using our usual notations to show the above 3 contracts on NOV 22, 2019 and al the possible cash flows on MAR 14, 2020. Notice that this is done with notations only.

B.On NOV 22, 2019 the spot price of gold was $1,491.30/ounce and the gold APR 2020 futures was trading for $1,502/ounce. Describe a swap strategy that GT could employ that would guarantee GT a profit of $600,000, while giving GJD the $4/ounce discount it wanted.