Question: Repeat Problems 17 17 and 17 18 assuming that the annual volatility
Repeat Problems 17.17 and 17.18 assuming that the annual volatility of gold is 20%.
Answer to relevant QuestionsYou have a project costing $1.50 that will produce two widgets, one each the first and second years after project completion. Widgets today cost $0.80 each, with the price growing at 2% per year. The effective annual ...Again consider the widget investment problem in Section 17.1. Verify that with S = $50, K = $30, r = 0.04879, σ = 0, and δ = 0.009569, the perpetual call price is $30.597 and exercise optimally occurs when the present ...Let t = 1. What is E(St |St < $98)? What is E(St |St < $120)? How do both expectations change when you vary t from 0.05 to 5? Let σ = 0.1. Does either answer change? How? Suppose you observe the following month-end stock prices for stocks A and B: For each stock: a. Compute the mean monthly continuously compounded return. What is the annual return? b. Compute the mean monthly standard ...Refer to Table 19.1. a. Verify the regression coefficients in equation (19.12). b. Perform the analysis for t = 1, verifying that exercise is optimal on paths 4, 6, 7, and 8, and not on path 1.
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