Question 6: A jewelry shop “Best Gold Ever" sells 100 ounces of gold jewelry in a year for $800 per ounce. The total expenses of running their business are $35,000 per year. They decide to purchase a...

Extracted text: Question 6: A jewelry shop “Best Gold Ever" sells 100 ounces of gold jewelry in a year for $800 per ounce. The total expenses of running their business are $35,000 per year. They decide to purchase a 1-year call option with a strike price of $420 for a premium of $10 per ounce to hedge their risks. Risk free interest rate is 5%. a) Compare the shop's unhedged profit/loss vs. hedged profit/loss when the price of gold is $350 per ounce b) Compare the shop's unhedged profit/loss vs. hedged profit/loss when the price of gold is $470 per ounce