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You own a one-year call option to buy one acre of Los Angeles real estate. The exercise price is $2.13 million, and the current, appraised
You own a one-year call option to buy one acre of Los Angeles real estate. The exercise price is $2.13 million, and the current, appraised market value of the land is $1.83 million. The land is currently used as a parking lot, generating just enough money to cover real estate taxes. The annual standard deviation is 16% and the interest rate 11%. How much is your call worth? Use the BlackScholes formula. (Enter your answer in millions. Do not round intermediate calculations. Round your answer to 4 decimal places.) |
Call value | $ million |
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