Suppose you own a lot in Toronto, Ontario. Similar lots have recently sold for $1,390,000.

The price of land in the area has increased 5% per year over the past 5 years, with an annual variance of 0.0676

A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,540,000.

The risk-free rate of interest is 3% per year, compounded continuously.

How much should you charge for this option?