Refer to Figure 24.6 to answer this question. Suppose today is May 25, 2018, and your firm is a jewellery manufacturer that needs 2,200 ounces of gold in October for the fall production run. You would like to lock in your costs today, because you're concerned that gold prices might go up between now and October. Assume that the hedge is market to market and each contract has 100 ounces of gold.

a. How could you use gold futures contracts to hedge your risk exposure? What total value would you be effectively locking in considering the required amount of gold in your contract?

b. Suppose gold prices are $1,070 per ounce in October. What is the profit or loss on your futures position?

Refer to Figure 24.6 to answer this question. Suppose today is May 25, 2018, and your firm is a jewellery manufacturer that needs 2,200 ounces of gold in October for the fall production run. You would like to lock in your costs today, because you're concerned that gold prices might go up between now and October. Assume that the hedge is market to market and each contract has 100 ounces of gold. a. How could you use gold futures contracts to hedge your risk exposure? What total value would you be effectively locking in considering the required amount of gold in your contract? (Omit $ sign in your response.) Total cost b. Suppose gold prices are $1,070 per ounce in October. What is the profit or loss on your futures position? (Input the amount as positive value. Omit $ sign in your response.) (Click to select v $ Commodity Futures Price Quotes for Canadian Dollar (Globex) (Price quotes for CME Canadian dollar (Globex) delayed at least 10 minutes as per exchange requirements.) Also available: pit. Session Quotes Current Session Prior Day Op Int Opt's Open High Low Time Last Jun'18 0.77675 0.77695 0.77025 0.77110 16:23 May 25 Set Chg Vol Set -0.00545 83631 0.7686 126984 Call Put Sep 18 0.77825 0.77825 0.77195 0.77225 16:23 May 25 -0.005452221 0.77795 17157 Call Put Dec'18 0.77830 0.77830 0.77340 0.77415 16:23 May 25 -0.00540 181 0.77925 3652 Call Put -0.00540 7 0.78050 99 Call Put Mar 19 0.77500 0.77590 0.77470 0.77550 16:23 May 25 Jun' 190.77805 0.77805 0.77600 0.77600* 16:23 May 25 Sep 19 0.78330* 16:23 May 25 -0.00540 8 0.78160 24 Call Put 0.78260 4 4 Times indicate exchange local time. . "An asterisk beside the last price indicates that the price is from a previous session. BAXThree-Month Canadian Bankers' Acceptance Futures Last Update: May 27, 2018, 6 p.m. Montral time (Data 15 minutes delayed) Month/Strike Bid Price Ask Price Settl. Price Net Change Open Int. Vol. Jun-18 98.205 98.210 98.210 0.000 194.893 16,043 Jul-18 0.000 0.000 98.110 0.000 0 0 Aug-18 0.000 0.000 98.060 0.000 0 0 Sep-18 98.005 90.010 98.010 0.000 165.324 17.717 Dec-18 97.810 97.815 97.810 0.000 195.168 30,564 Mar-19 97.645 97.650 97.645 0.005 178.805 14.975 Jun-19 97.530 97.540 97.535 0.005 101.977 8.497 Sep-19 97.455 97.460 97.455 0.005 67,180 14.042 Dec-19 97.400 97.405 97.395 0.010 45,7800 8,342 Mar-20 97.345 97.355 97.345 0.005 19.423 1.151 Jun-20 97.260 97.330 97.300 0.060 6.323 206 Sep-20 0.000 0.000 97.260 3.190 0 0.000 0.000 Dec-20 0.000 0.000 97.220 1.973 10 Mar-21 0.000 0.000 97.180 0.000 846 10 Total 111,557 Commodity Futures Price Quotes for Gold (Globex) (Price quotes for COMEX Gold (Globex) delayed at least 10 minutes as per exchange requirements.) Also available: pit. Session Quotes Current Session Prior Day Open High Low Last Time Set Chg Vol Set Op Int Opt's May'18 1292.1 1287.4 1292.1 18:01 May 25 1303.3 -0.4 1 1303.7 2 Call Put Jun'18 1304.0 1307.2 1299.4 1301.2 18:01 May 25 1303.7 -0.7 286525 130.4.4 107286 Call Put Jul'18 1307.1 1309.6 1302.3 1303.9 18:01 May 25 1306.4 -0.9 1517 1307.3 713 Call Put Aug'18 1309.0 1312.6 1304.6 1306.5 18:01 May 25 1309.0 -0.8 95181 1309.8 258891 Call Put Oct'18 1316.8 1318.7 1311.4 1312.1 18:01 May 25 1315.2 -0.9 1683 1316.1 10697 Call Put Dec 18 1322.7 1325.2 1317.8 1318.5 18:01 May 25 1321.7 -0.9 5701 1322.6 76057 Call Put Feb'19 1326.9 1330.2 1325.0 1325.0 18:01 May 25 1328.1 -0.9 173 1329.0 11769 Call Put Apr 19 1335.5 1335.5 1333.3 1334.7 18:01 May 25 1334.4 -1.0 162 1335.4 3535 Call Put Jun 19 1340.3 1341.3 1340.3 1341.3 18:01 May 25 1341.1 -1.0 81 1342.1 3603 Call Put Aug'19 1347.2 1347.4 1346.5 1346.5 18:01 May 25 1347.8 -1.0 43 1348.8 420 Call Put Oct19 1352.0 1352.0 1351.0 1351.0 18:01 May 25 1354.6 -1.0 6 1355.6 35 Call Put Dec 19 1360.2 1361.8 1360.2 1360.9 18:01 May 25 1361.4 -1.0 15 1362.4 3968 Call Put Feb 20 1370.0 18:01 May 25 1368.2 -1.0 1369.2 1 Call Put Jun 20 1386.0 18:01 May 25 1382.1 -1.0 1383.1 273 Call Put Dec 20 1405.3 18:01 May 25 1403.2 - 1.0 1404.2 2863 Call Put Jun 21 1345.4 18:01 May 25 1424.7 -1.0 1425.7 185 Call Put Dec 21 1474.0 18:01 May 25 1446.2 -1.2 1447.4 200 Call Put Jun 22 1382.7 18:01 May 25 1467.1 -1.7 1468.8 5 Call Put Dec 22 1519.0 18:01 May 25 1488.0 -2.3 1490.3 11 Call Put Jun 23 1441.1 18:01 May 25 1508.7 -2.7 1511.4 5 Call Put Times indicate exchange local time. Light Crude Oil (Price quotes for NYMEX Light Crude Oil delayed at least 10 minutes as per exchange requirements.) Also available: pit. Session Quotes Current Session Prior Day fixed Open High Low Last Time Set Chg Vol Set Op Int Opt's Aug 18 70.53 70.67 67.33 67.42 18:04 May 25 67.88 -2.83 178569 70.58 244456 Call Put Sep 18 70.14 70.26 67.02 67.09 18:04 May 25 67.78- -2.80 113847 70.19 258898 Call Put Oct 18 69.72 69.72 66.65 66.70 18:04 May 25 67.06 -2.63 83171 69.69 179582 Call Put Nov 18 69.26 69.26 66.32 66.41 18:04 May 25 66.72 -2.51 44135 69.23 115532 Call Put Dec'18 68.71 68.79 65.95 66.04 18:04 May 25 66.36 -2.43 133701 68.79 307888 Call Put Jan 19 68.28 68.28 65.62 65.62 18:04 May 25 66.01 -2.35 29692 68.36 121266 Call Put Feb 19 67.67 67.67 65.21 65.38 18:04 May 25 65.58 -2.27 10267 67.85 63597 Call Put Mar 19 67.34 67.34 64.77 64.83 18:04 May 25 65.11 -2.23 19324 67.34 75968 Call Put Apr 19 66.84 66.84 64.32 64.52 18:04 May 25 64.66 -2.19 5502 66.85 38324 Call Put May 19 66.25 66.25 63.92 64.01 18:04 May 25 64.23 -2.15 2212 66.38 3361 Call Put Jun 19 65.93 65.93 63.48 63.61 18:04 May 25 63.82 -2.11 35182 65.93 147870 Call Put Jul 19 65.27 65.27 63.37 63.41 18:04 May 25 63.39 -2.07 1924 65.46 32399 Call Put Aug 19 66.00 64.40 64.80 18:04 May 25 62.97 -2.04 681 65.01 27621 Call Put Sep 19 63.21 63.25 62.55 62.55 18:04 May 25 62.59 -2.01 3181 64.60 45263 Call Put Oct19 62.30 62.30 62.30 62.30 18:04 May 25 62.24 -1.98 656 64.22 25781 Call Put Nov 19 63.45 18:04 May 25 61.91 -1.95 1192 63.86 27834 Call Put Dec 19 63.50 63.57 61.29 61.39 18:04 May 25 61.61 -1.93 50822 63.54 175133 Call Put Jan 20 63.15 63.15 63.15 63.15 18:04 May 25 61.24 -1.91 1149 63.15 20995 Call Put Feb 20 63.13 63.13 63.13 18:04 May 25 60.89 -1.89 205 62.78 7224 Call Put Mar 20 62.27 62.27 62.27 18:04 May 25 60.56 -1.86 570 62.42 13063 Call Put Apr 20 52.00 18:04 May 25 60.26 -1.83 74 62.09 2824 Call Put May 20 18:04 May 25 59.98 -1.80 23 61.78 2991 Call Put Jun 20 61.41 61.48 59.43 59.76 18:04 May 25 59.71 -1.76 7814 61.47 30184 Call Put Jul 20 55.44 18:04 May 25 59.41 -1.73 76 61.14 3304 Call Put Aug 20 49.90 18:04 May 25 59.13 -1.71 108 60.84 3602 Call Put Sep 20 56.57 18:04 May 25 58.83 -1.71 294 60.54 6147 Call Put Trading Unit: 1,000 U.S. barrels