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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

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ANSWER : $15996.12

jeff jeffy answered 1 month ago
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