You own a one-year call option on 1 acre of

You own a one-year call option on 1 acre of Los Angeles real estate. The exercise price is $2 million, and the current, appraised market value of the land is $1.7 million. The land is currently used as a parking lot, generating just enough money to cover real estate taxes. The annual standard deviation is 15 percent and the interest rate 12 percent. How much is your call worth? Use the Black–Scholes formula.

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