The Current Price of Gold Is $310

question 5

Multiple Choice

The current price of gold is $310.00 per ounce. The effective lease rate and risk free rate are 1.0% and 3.5%, respectively. If the cost to mine one ounce of gold is a constant $250, what is the value of an option to wait and mine the gold later?

• A) $135
• B) $145
• C) $155
• D) $165

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Definitions:

Cost Of Goods Sold

The total direct expenses related to producing goods sold by a business.

Net Income

The profit a company has after deducting all its expenses from its total revenue.

Unit Costs

The cost incurred to produce, purchase, or supply one unit of a product or service, calculated by dividing total costs by the number of units produced or purchased.

Inventory Items

Goods or materials that a business holds for the purpose of sale or production.