Question

In: Finance

You own a lot in Lowell, Massachusetts that is currently unused. Similar lots have recently sold...

You own a lot in Lowell, Massachusetts that is currently unused. Similar lots have recently sold for $0.7 million. Over the past five years, the price of land in the area has increased 8 percent per year, with an annual standard deviation of 12 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $0.77 million. The risk-free rate of interest is 3 percent per year, compounded continuously. How much should you charge for the option?

$16,877.44

$15,996.12

$14,762.58

$13,267.79

$12,196.55

Solutions

Expert Solution

I HAVE GIVEN FORMULAS, WHICH ARE HAND WRITTEN, SO YOU CAN SOLVE THEM EASILY, ALL VALUES ARE EXPLAINED

jeff jeffy answered 3 weeks ago
Next > < Previous

Related Solutions

You own a lot in Lowell, Massachusetts that is currently unused. Similar lots have recently sold...
You own a lot in Lowell, Massachusetts that is currently unused. Similar lots have recently sold for $0.7 million. Over the past five years, the price of land in the area has increased 8 percent per year, with an annual standard deviation of 12 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $0.77 million. The risk-free rate of interest is 3 percent per year, compounded continuously. How...
You own a lot in Orlando, Florida that is currently unused. Similar lots have recently sold...
You own a lot in Orlando, Florida that is currently unused. Similar lots have recently sold for $1 million. Over the past five years, the price of land in the area has increased 6 percent per year, with an annual standard deviation of 10 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1.05 million. The risk-free rate of interest is 3.5 percent per year, compounded continuously. How...
You own a lot in Savannah, Georgia that is currently unused. Similar lots have recently sold...
You own a lot in Savannah, Georgia that is currently unused. Similar lots have recently sold for $0.5 million. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 12 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $0.55 million. The risk-free rate of interest is 3 percent per year, compounded continuously. How...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,220,000. Over the past five years, the price of land in the area has increased 4 percent per year, with an annual standard deviation of 33 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,370,000. The risk-free rate of interest is 4 percent per year, compounded continuously. How much...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.8 million. Over the past five years, the price of land in the area has increased 11 percent per year, with an annual standard deviation of 24 percent. A buyer has recently approached you about buying the land in the next 11 months for $2,030,000. The risk-free rate of interest is 5 percent per year, compounded continuously. You want the option to...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,270,000. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 33 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,420,000. The risk-free rate of interest is 5 percent per year, compounded continuously. How much...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,320,000. Over the past five years, the price of land in the area has increased 6 percent per year, with an annual standard deviation of 32 percent. You have approached a buyer and would like the option to sell the land in 12 months for $1,470,000. The risk-free rate of interest is 4 percent per year, compounded continuously.    What is the...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,340,000. Over the past five years, the price of land in the area has increased 8 percent per year, with an annual standard deviation of 31 percent. You have approached a buyer and would like the option to sell the land in 12 months for $1,490,000. The risk-free rate of interest is 4 percent per year, compounded continuously.    What is the...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,320,000. Over the past five years, the price of land in the area has increased 6 percent per year, with an annual standard deviation of 32 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,470,000. The risk-free rate of interest is 4 percent per year, compounded continuously. How much...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently...
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,280,000. Over the past five years, the price of land in the area has increased 6 percent per year, with an annual standard deviation of 35 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,430,000. The risk-free rate of interest is 4 percent per year, compounded continuously. How much...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT