Repeat Problems 17.17 and 17.18 assuming that the annual volatility of gold is 20%. In problem 17.17
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In problem 17.17
A mine costing $275 will produce 1 ounce of gold on the day the cost is paid.
In problem 17.18
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.
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Volatility increases the trigger price as well ...View the full answer
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