An industrialist who uses gold in his production line observes the gold spot price today:…

An industrialist who uses gold in his production line observes the gold spot price today: $1,150/ounce. The current futures prices for APR, MAY AUG and OCT this year are: 1,155; 1,160; 1,175 and 1,190 respectively. The industrialist business involves 5,000 ounces of gold and will take place on MAY 25 this year. One futures = 100 ounces. 1.1 The Industrialists uses a hedge ratio of 7. Use a time table to show how the industrialists opens his hedge today. DATE SPOT MARKET FUTURES MARKET t S = $1,150 Long 35 AUG GOLG futures Contract to buy 5,000 ounces FLAUG = $1,175 Ft, on May 25 Do nothing n = (.7)[5,000/100] = 35. = = =