Question
My brother just charged his friend $600 for offering a bet: if the temperature of tomorrow is above 51, my brother will pay 1.5 times
My brother just charged his friend $600 for offering a bet: if the temperature of tomorrow is above 51, my brother will pay 1.5 times $600 to his friend; if the temperature is below 51 tomorrow, my brother will pay 0.5 times $600 to his friend. I do not want my brother to lose money when tomorrow's temperature is above 51 and decide to buy an insurance that will make my brother break even when tomorrow's temperature is above 51 (in other words, the insurance policy will pay my brother 0.5 times $600 when tomorrow's temperature is above 51). If risk free rate is zero, how much should I pay for this insurance (keep two decimal places)?
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