Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you own a one-year european call option to buy one

You own a one-year European call option to buy one acre of Los Angeles real...

80.2K

Verified Solution

Question

Finance

image

You own a one-year European call option to buy one acre of Los Angeles real estate. The exercise price is $2.14 million, and the current, appraised market value of the land is $1.84 million. The land is currently used as a parking lot, generating just enough money to cover real estate taxes. The annual standard deviation is 17% and the interest rate is 10%. How much is your call worth? Use the Black-Scholes formula. (Enter your answer in dollars not in millions, rounded to the nearest dollar. Do not round intermediate calculations.) Call value

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students