You own a lot in Bozeman, Montana that is currently unused. Similar lots have recently sold for $1.2 million. Over the past five years, the price of land in the area has increased 13 percent per year, with an annual standard deviation of 18 percent. A buyer has recently approached you and wants an option to buy the land in the next 10 months for $1,260,000. The risk-free rate of interest is 6 percent per year, compounded continuously. How much should you charge for the option?

Multiple Choice

• $83,217.92

• $77,795.74

• $66,623.05

• $79,255.16

• $75,292.40