Assume that you have the rights to a coal mine and the most, Ask an Expert

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Assume that you have the rights to a coal mine and the most recent valuation of the mine was £6.6 million. Because of increasing demand from Asia, the price of similar mines has grown by 15 per cent per annum, with an annual standard deviation of 25 per cent. A buyer has recently approached you and wants an option to buy the mine in the next 12 months for £6.9 million. The risk-free rate of interest is 5 per cent per year, compounded continuously.

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How much should you charge for the option?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92753646

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