A large dental lab plans to purchase 1,000 ounces of gold in 1 month. Assume that gold prices can be $280, $300, or $320 an ounce.
a. What will total expenses be if the firm purchases call options on 1,000 ounces of gold with an exercise price of $300 an ounce? The options cost $3 per ounce.
b. What will total expenses be if the firm purchases call options on 1,000 ounces of gold with an exercise price of $295 an ounce? These options cost $7 per ounce.

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The Answer of A large dental lab plans to purchase 1,000 ounces of gold in 1 month. Assume that gold prices can be $280, $300, or $320 an ounce.
a. What will total expenses be if the firm purchases call options on 1,000 ounces of gold with an exercise price of $300 an ounce? The options cost $3 per ounce.
b. What will total expenses be if the firm purchases call options on 1,000 ounces of gold with an exercise price of $295 an ounce? These options cost $7 per ounce.

A Large Dental Lab Plans to Purchase 1,000 Ounces of Gold