You own a lot in Florida that is currently unused. Similar lots have recently sold for $1.2 million. Over the past five years, the price of land in the area has increased 10 percent per year, with an annual standard deviation of 25 percent. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1,300,000. The risk-free rate of interest is 4 percent per year, compounded continuously. How much should you charge for the option
