A mine costing $1000 will produce 1 ounce of gold per year forever at a marginal extraction cost of $250, with production commencing 1 year after the mine opens. Gold volatility is zero. What is the value of the mine?
Answer to relevant QuestionsRepeat Problems 17.17 and 17.18 assuming that the annual volatility of gold is 20%. Consider the widget investment problem outlined in Section 17.1. Show the following in a spreadsheet. a. Compute annual widget prices for the next 50 years. b. For each year, compute the net present value of investing in ...What is Pr(St < $98) for t = 1? How does this probability change when you change t? If x ∼ N(2, 5), what is E(ex)? What is the median of ex? Repeat the previous problem, only assume that the options trader purchases 1000 1-year at-the-money straddles.
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