1. (Hold the Gold?) You have 1 unit (400 troy ounces) of gold. Assume constant monthly storagecosts of C and no interest. Suppose prices now are L (low) and will be H > L (high) nextmonth with probability p. When is the best time to sell your gold?
I have the answer for the first one but can you help me on the 2nd one?
2. (Carry the Corn?) It turns out you also have more gold-colored goods: corn. Assume the samesetup as in the gold problem except that a fraction δ of your corn decays every month you storeit. (So storing corn three months will get you either δ3L or δ3H.) When is the best time tosell your corn?