You Own a Lot in Key West, Florida, That Is

question 10

Multiple Choice

You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.2 million. Over the past five years, the price of land in the area has increased 10 percent per year, with an annual standard deviation of 23 percent. A buyer has recently approached you and wants an option to buy the land in the next 9 months for $1,310,000. The risk-free rate of interest is 7 percent per year, compounded continuously. How much should you charge for the option? (Round your answer to the nearest $1,000.)

• A)$52,000
• B)$58,000
• C)$63,000
• D)$72,000
• E)$77,000

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Definitions:

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A region of the brain that is important for language development and is located in the temporal lobe on the left side of the brain.

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A group of steroid hormones that play a crucial role in the development and regulation of female reproductive and sexual functions.