The current price of silver is $7 per ounce. You are a maker of silver jewelry and
Question:
The current price of silver is $7 per ounce. You are a maker of silver jewelry and wish to obtain a guaranteed supply of silver at the end of the year at a maximum price of $8 per ounce. If the volatility of silver is 20%, how much would you be willing to pay for the guarantee? The risk-free interest rate is 3%.
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The value of the guarantee is nothing ...View the full answer
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