11 AaB Code AaBbccde AaBbCcDc ABCDdEt AaBb Aalb x Av. Av JOO Normal No Spacing Heading 1 Heading 2 Title Su Golddigger's estimated unhedged net income 1 year from today is as follows. See Table 4.1 in the texbook. Gold digger produces 1 oz of gold at the end of year. Net income = Gold price in one year - Fixed cost of $330 - variable cost of $50. Golddigger is going to hedge the gold price risk by buying a 410 strike put with premium of $4.00 and selling a 430 strike call with premium of $4.00. The interest rate is 5% per year. Thus the future value of the cost (4.00 -4.00)*(1+.05) = $0.00. Draw the diagram of Net Income with the collar on a white paper. Must explain the steps you take to draw the diagram. I 4.1 Basic Risk Management: The Producer's Perspective 91 Profit (S) 200 FIGURE 4.1 Producer profit in 1 year, assuming hedging with a short forward contract at a forward price of $42[/oz. + Unhedged seller - Short gold forward - Hedged seller 150 100 $40 50 0 -50 -100 $380 $420 - 150 250 500 550 300 350 400 450 Gold Price in 1 Year (S) $420, profit is $40/oz. Since it has gold in the ground, Golddiggers has a long position in gold shout forward nosition: The "short gold forward" line represents the