You own a one - year call option to buy one acre of Los Angeles real estate.

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Question:

You own a one

-

year call option to buy one acre of Los Angeles real estate. The exercise price is $

2.08

million, and the current, appraised market value of the land is $

1.78

million. The land is currently used as a parking lot, generating just enough money to cover real estate taxes. The annual standard deviation is

17 %,

and the interest rate is

11 % .

How much is your call worth? Use the Black

Scholes formula.

Posted Date: May 18, 2024 05:11 PM

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You own a one - year call option to buy one acre of Los Angeles real estate.

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