You have received an offer to buy a lease for 1 weeks worth, Financial Management

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You have received an offer to buy a lease for 1 weeks worth

You have received an offer to buy a lease for 1 week's worth of production (100 ounces) in a particular gold mine. This lease will occur in exactly 18 months.

It is an old mine, so it costs $400/ounce to extract gold. Gold is trading for $365/ounce today but has a volatility of 40% per annum. The prevailing interest rate is 10% per year. What is the value of the gold mine?

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Financial Management: You have received an offer to buy a lease for 1 weeks worth

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Financial Management: You have received an offer to buy a lease for 1 weeks worth

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