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My brother just charged his friend $200 for offering a bet: if the temperature of tomorrow is above 72, my brother will pay 1.5


 

My brother just charged his friend $200 for offering a bet: if the temperature of tomorrow is above 72, my brother will pay 1.5 times $200 to his friend; if the temperature is below 72 tomorrow, my brother will pay 0.5 times $200 to his friend. I do not want my brother to lose money when tomorrow's temperature is above 72 and decide to buy an insurance that will make my brother break even when tomorrow's temperature is above 72 (in other words, the insurance policy will pay my brother 0.5 times $200 when tomorrow's temperature is above 72). If risk free rate is zero, how much should I pay for this insurance (keep two decimal places)? Your Answer: Answer

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