Question

In: Finance

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 sell the land to the buyer in one year. What is the price of the transaction today?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

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 $1,270,000. 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...
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 $1,230,000. Over the past five years, the price of land in the area has increased 5 percent per year, with an annual standard deviation of 34 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,380,000. 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 $1,340,000. 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. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,490,000. 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 $1,370,000. Over the past five years, the price of land in the area has increased 5 percent per year, with an annual standard deviation of 28 percent. You have approached a buyer and would like the option to sell the land in 12 months for $1,520,000. The risk-free rate of interest is 3 percent per year, compounded continuously. What is the price...
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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT