# a. Suppose that Auric insures against a price increase by purchasing a 440-strike call. Verify by drawing a profit diagram that simultaneously selling a 400 strike put will generate a collar. What is the cost of this collar to Auric?

a. Suppose that Auric insures against a price increase by purchasing a 440-strike call. Verify by drawing a profit diagram that simultaneously selling a 400 strike put will generate a collar. What is the cost of this collar to Auric?

b. Find the strike prices for a zero-cost collar (buy high-strike call, sell low-strike put) for which the strikes differ by $30.

b. Find the strike prices for a zero-cost collar (buy high-strike call, sell low-strike put) for which the strikes differ by $30.

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## Auric Enterprises is using gold as an input Therefore it would like to hedge against pric…View the full answer

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