12. (1 mark) Using the appropriately adjusted Black-Scholes call option model, to the nearest dollar what is the value of the incentive fee if the incentive fee percentage is 20%, the time to maturity is ONE year, the current net asset value (NAV) equals $40 million, the high water mark (HWM) equals $44 million, the riskless nominal annual interest with continuous compounding is 5%, and the volatility of NAV is 30%?

1. $1,027,840.
2. $787,040.
3. $1,541,759.
4. $1,180,560.
5. None of the above.