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You own a lot in Savannah, Georgia that is currently unused.Similar lots have recently sold for $0.5 million. Over the pastfive years, the price of land in the area has increased 7 percentper year, with an annual standard deviation of 12 percent. A buyerhas recently approached you and wants an option to buy the land inthe next 12 months for $0.55 million. The risk-free rate ofinterest is 3 percent per year, compounded continuously. How muchshould you charge for the option? $9,590.40 $10,456.77 $11,425.80$12,495.76 $13,334.72
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