How much is your option worth

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Problem: You own a one-year option to buy one acre of San Diego 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% and the interest rate 12%. How much is your option worth?

Reference no: EM133617068

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