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Question IV A company has a stock of 200 ounces of gold. The gold quote on 1/10/N is $1.730/ounce. Fearing the devaluation of the stock
Question IV A company has a stock of 200 ounces of gold. The gold quote on 1/10/N is $1.730/ounce. Fearing the devaluation of the stock until December that year the company decides to cover its risk using gold futures contracts for December. These contracts are negotiated in the New York Mercantile Exchange. Each contract represents 100 ounces of gold. On the first of October it orders its broker to sell two futures contracts with expiry in December of year N. The price of sale in 1 October is $1.720/ounce. Contrary to the plan, the company closes its futures position on the fourth of October of year N, buying two futures contracts. In the following table you will find the daily prices: Date 1/10 2/10 3/10 4/10 $/ounce 1.720 1.719 1.722 1.725 Request: Calculate the daily and accumulated gains and losses
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