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3. (Patent insurance) One year ago, Bioette, a biotech incubator, entered into a forward contract to sell one of its patents to Pharm, a major drug company, in 2 years for $10 million. Currently, with only 1 year remaining in the contract, both parties are concerned about the uncertainty of the patent's market value. A major insurer, Protech, is offering loss insurance to both parties. For a premium of $.4 million now, it will pay Bioette the difference between the market value of the patent and the fixed sales price of $10 million if the market price is larger. Otherwise, it will pay nothing. In a similar way, for a premium of $1 million, Protech will pay Pharm the difference between the $10 million and the market price if the market price is less than $10 million. Otherwise, it will pay nothing. Considering that the price of a zero-coupon bond with a face value of $100 and 1 year to maturity is $90, what is the value that Protech would assign to the patent? (You may assume the insurance is tradable.) 3. (Patent insurance) One year ago, Bioette, a biotech incubator, entered into a forward contract to sell one of its patents to Pharm, a major drug company, in 2 years for $10 million. Currently, with only 1 year remaining in the contract, both parties are concerned about the uncertainty of the patent's market value. A major insurer, Protech, is offering loss insurance to both parties. For a premium of $.4 million now, it will pay Bioette the difference between the market value of the patent and the fixed sales price of $10 million if the market price is larger. Otherwise, it will pay nothing. In a similar way, for a premium of $1 million, Protech will pay Pharm the difference between the $10 million and the market price if the market price is less than $10 million. Otherwise, it will pay nothing. Considering that the price of a zero-coupon bond with a face value of $100 and 1 year to maturity is $90, what is the value that Protech would assign to the patent? (You may assume the insurance is tradable.)