# Question

A mine costing $275 will produce 1 ounce of gold on the day the cost is paid. Gold volatility is zero. What is the value of the mine?

## Answer to relevant Questions

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? Consider again the project in Problem 17.2, only suppose that the widget price is unchanging and the cost of investment is declining at 2% per year. When will you invest? What is the value today of the project? You drawthese five numbers randomly from a normal distribution with mean−8 and variance 15: {−7, −11, −3, 2, −15}. What are the equivalent draws from a standard normal distribution? Suppose x1∼ N(1, 5), x2 ∼ N(2, 3), and x3 ∼ N(2.5, 7), with correlations ρ1, 2 = 0.3, ρ1, 3 = 0.1, and ρ2,3 = 0.4. What is the distribution of x1+ x2 + x3? x1+ (3× x2) + x3? x1+ x2 + (0.5× x3)? An options trader purchases 1000 1-year at-the-money calls on a non-dividend paying stock with S0 = $100, α = 0.20, and σ = 0.25. Assume the options are priced according to the Black-Scholes formula and r = 0.05. a. Use ...Post your question

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