Suppose a risk-neutral power plant needs 10000 tons of coal


Suppose a risk-neutral power plant needs 10,000 tons of coal for its operations next month. It is uncertain about the future price of coal. today it sells for $60 a ton but next month it could be $50 or $70 (with equal probability). How much would the power plant be willing to pay today for an option to buy a ton of coal next month at today's price? (Ignore discounting over the short period of a month)

Request for Solution File

Ask an Expert for Answer!!
Business Economics: Suppose a risk-neutral power plant needs 10000 tons of coal
Reference No:- TGS01179138

Expected delivery within 24 Hours