Question 4. (20 points) In January, the operation manager of a new mining company reviews it platinum production plans. The production forecasts suggest that the company will have 1,000 ounces of newly mined and refined platinum available for sale the following June. The manager considers the current price of the July platinum futures contract at $778.00 per ounce favorable, given the company's total production costs, including interest and depreciation, of $680.00 an ounce. As a result, on January 28, the mining financial manager decides to lock in a profit by hedging his anticipated production using the July platinum futures contract at $778.00 per ounce. Contract size is 50 troy ounces. On January 28, the spot price is $773.00 per ounce. (a) Indicate whether the financial manager should take a long or a short futures position to hedge the risk exposure. How many contracts are needed for a full hedge? (3) (b) On January 28, the company trades July futures contracts at $778.00 per ounce. The initial margin deposit for CME Group is $3,520 per contract and the maintenance margin is $3,200. The next day, the July platinum futures price closes at $795.00 per ounce. What is the balance in the margin account? Would the company get a margin call? Why or why not, and if so, how much? What if the July platinum futures price closes at $760.00 per ounce? (5) (c) What price change would lead to a margin call from the initial futures price of $778.00 per ounce (up or down)? (3) (d) On June 15, the company sells platinum at $800.00 per ounce locally and it offsets the futures positions. Suppose that on June 15, the futures price is $805.00 per ounce. What is the total gain/loss from the futures contracts? What is the company's net (effective) selling price per ounce for platinum? (5) (e) What would be the company's net selling price per ounce for platinum if the financial manager hedged only 50% of the forecasted production? What is the total gain/loss from the futures contracts? (4)