Landmines pure gold producer needs money

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Reference no: EM132045476

Landmines a pure gold producer needs money. Want to raise money by selling a bond. Their investment banker, Bonkman Sacks, designs the bond to sell. It will pay at maturity a year later $1,000 mil + an additional amount. This additional amount (figures are all in $ mil) is tied to gold’s price S(T) and will be:

0 if S(T)<$950

10[S(T)-950] if S(T) > $950

If the risk free rate is 10%, the current price of gold is $920 and the volatility of gold price is 20% per year can you find what is the amount of money that they can raise?

Reference no: EM132045476

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