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Standard Oil A bond issued by Standard Oil some time ago worked as follows. The holder received no interest. At the bond's maturity, the company

Standard Oil
A bond issued by Standard Oil some time ago worked as follows. The holder received no
interest. At the bond's maturity, the company promised to pay $1,000 plus an additional
amount based on the price of oil at that time. The additional amount was equal to the
product of 170 and the excess (if any) of the price of a barrel of oil at maturity over $25.
The maximum additional amount paid was $2,550(which corresponds to a price of $40
per barrel).
What is the price of the bond? If your answer is 1234.56, write it as 1235.
Assumptions
The interest rate is 0%.
The maturity of the bond is 1 year.
The current oil price is $25 per barrel.
The volatility of the log price return of oil is 20%.
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