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?

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

jeff jeffy answered 1 year ago

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