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You own a lot in Key West, Florida that is currently unused. Similar lots have recently...

  1. You own a lot in Key West, Florida that is currently unused. Similar lots have recently sold for $0.45 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 13 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $0.48 million. The risk-free rate of interest is 3 percent per year, compounded continuously. How much should you charge for the option?

    $16,655.95

    $15,847.18

    $14,797.23

    $13,350.66

    $12,508.92
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