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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: tyc:> who wrote (105133)5/28/2001 12:33:05 AM
From: LLCF  Read Replies (1) of 436258
 
< You say I am just buying a future on 1 ounce of gold. Ok! How much is that future worth ? >

It's an interest calculation as I stated... you refuted that, so I explained it!

<Presumably I must pay for it now, what I had in mind was paying only $220 in four years time, and what I wanted to know is what the market would charge me now for the right to do that. I might not exercise that right. I might simply sell it then at the then market price. Indeed if the price of gold is below $220 then I will not exercise it. (If the producer cannot meet its costs of production it will not produce). >

Ooops, now you're changing the problem... you're original wording which I addressed specifically:

Message 15859722

<<How would the market calculate a fair present value for an asset that will produce one ounce of gold at a cost of $220 4 years from now ?>>

Now you're throwing "rights" in... and changing it to an option problem... notice the original workding is "WILL PRODUCE":

<Presumably I must pay for it now, what I had in mind was paying only $220 in four years time, and what I wanted to know is what the market would charge me now for the right to do that. I might not exercise that right. I might simply sell it then at the then market price. Indeed if the price of gold is below $220 then I will not exercise it. (If the producer cannot meet its costs of production it will not produce).>

Now they presumably have the option to produce at that cost which sounds very strange... they'll just hire all the boyz and pick up some nuggets at the last minute if the price is right?? You'll have to be more specific about the details for an answer... is this real life or a "problem" some lame professor threw out?

<Well.... I'm not sure but I sure appreciate your interest. >

GFY!

DAK
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