A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023.

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A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023. It has concern about silver gold price may decline over the next several months. Silver price today is $23.5 per oz; the futures price for December 2023 delivery is $24.0 per ounce. Each silver contract is 5000 oz. silver.

Question:

1) How many silver contacts it will need to sell to hedge the price thru year end 2023?

2) If at year end 2023, silver price declines to $23 per oz., calculate and see how the hedge works.

Related Book For answer-question

Fundamentals Of Corporate Finance

ISBN: 9780135811603

5th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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Posted Date: Jan 03, 2024 06:48 AM

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A gold miner expects to have 80, 000 ounces of silver gold production at end of 2023.

Question:

Expert Answer:

To hedge against the potential decline in silver prices the gold miner can use futures contracts The ... View the full answer

Fundamentals Of Corporate Finance

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