The price of oil is $120 per barrel.The effective lease rate and risk free rate are 5.0% and 6.0%,respectively.The constant cost of extraction is $105 per barrel and the volatility of prices is 18.0%.What is the value of an option to defer extraction?
A) $30.68
B) $32.08
C) $34.56
D) $38.34
Correct Answer:
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