Question
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.8 million. Over the past five years,
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.8 million. Over the past five years, the price of land in the area has increased 11 percent per year, with an annual standard deviation of 15 percent. A buyer has recently approached you about buying the land in the next 11 months for $2,030,000. The risk-free rate of interest is 5 percent per year, compounded continuously. You want the option to sell the land to the buyer in one year. What is the price of the transaction today?
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Multiple Choice
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$190,571.46
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$200,100.03
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$51,513.13
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$72,191.07
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$3,376.81
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