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The 1-year forward price of copper is $1/lb. The 1-year continuously compounded interest rate is 6%. One-year option prices for copper are shown in the
The 1-year forward price of copper is $1/lb. The 1-year continuously compounded interest rate is 6%. One-year option prices for copper are shown in the table below. Suppose CDE mines copper, with fixed costs of $0.50/lb and variable cost of $0.40/lb. If CDE does nothing to manage copper risk: What is its profit 1 year from now, per pound of copper, if the copper price in 1 year is $0.80$ ? What is its profit 1 year from now, per pound of copper, if the copper price in 1 year is $0.90$ ? What is its profit 1 year from now, per pound of copper, if the copper price in 1 year is $1.00$ ? What is its profit 1 year from now, per pound of copper, if the copper price in 1 year is $1.10$ ? What is its profit 1 year from now, per pound of copper, if the copper price in 1 year is $1.20$ ? If on the other hand CDE sells forward its expected copper production
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