so.3 You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.35 million. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 35 percent. You have approached a buyer and would like the option to sell the land in the next 12 months for $1.6 million. The risk-free rate of interest is 5 percent per year, compounded continuously. What is the price of the put option necessary to guarantee your sales price? (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)
so.3 You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.35 million. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 35 percent. You have approached a buyer and would like the option to sell the land in the next 12 months for $1.6 million. The risk-free rate of interest is 5 percent per year, compounded continuously. What is the price of the put option necessary to guarantee your sales price? (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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so.3
| You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.35 million. Over the past five years, the price of land in the area has increased 7 percent per year, with an annual standard deviation of 35 percent. You have approached a buyer and would like the option to sell the land in the next 12 months for $1.6 million. The risk-free rate of interest is 5 percent per year, compounded continuously. |
| What is the price of the put option necessary to guarantee your sales price? (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.) |
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