Tim, a forest landowner, has negotiated a 2-year timber sale contract with a timber broker, in which Tim has the right but not the obligation to sell his hardwood trees anytime in the next 2 years at $2,200/ac. Currently, Tim can sell his trees for about $2,000/ac, however, he knows that there is uncertainty in timber prices and yield. Possible realizations of timber values of this tract are given in the table below.

- With a risk free rate of 6%, what is the value of this contract? What if Tim can only sell his trees to the timber broker at the end of year 2? (Please Show All Work)

	stumpage value ($/ac)
path	t=0	t=1	t=2
1	2,000	2,190	2,143
2	2,000	2,340	2,600
3	2,000	2,440	2,130
4	2,000	1,865	1,945
5	2,000	2,221	3,120
6	2,000	1,521	1,600
7	2,000	1,843	1,888
8	2,000	1,766	2,449
9	2,000	1,900	2,175