Question

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

You own a one-year European call option to buy one acre of Los Angeles real estate. The exercise price is $2.19 million. Suppose the land is occupied by a warehouse generating rents of $245,000 after real estate taxes and all other out-of-pocket costs. The present value of the land plus the warehouse is $1.89 million. The annual standard deviation is 16% and the interest rate is 10%.

How much is your call worth? (Enter your answer in dollars not in millions. Do not round intermediate calculations.)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Proper solution is provided.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You own a one-year European call option to buy one acre of Los Angeles real estate....
You own a one-year European call option to buy one acre of Los Angeles real estate. The exercise price is $2.11 million. Suppose the land is occupied by a warehouse generating rents of $205,000 after real estate taxes and all other out-of-pocket costs. The present value of the land plus the warehouse is $1.81 million. The annual standard deviation is 13% and the interest rate is 13%. How much is your call worth? Call value
You own a one-year European call option to buy one acre of Los Angeles real estate....
You own a one-year European call option to buy one acre of Los Angeles real estate. The exercise price is $2.07 million, and the current, appraised market value of the land is $1.77 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 is 14%. How much is your call worth? Use the Black–Scholes formula. (Enter your answer in dollars not...
You buy one contract for a 6-month European call option in June 2010 for $1.25 with...
You buy one contract for a 6-month European call option in June 2010 for $1.25 with exercise price of $18.00. On September 1, 2010, the stock reaches its 52-week low at $12.65 per share. On December 16, 2010, the stock is selling at $16.75. What is your profit or loss on the purchase?
Multi Step Binomial Tree: Consider again the at-the-money European call option with one year left to...
Multi Step Binomial Tree: Consider again the at-the-money European call option with one year left to maturity written on a non-dividend paying stock. As in exercise 2, let today’s stock price be 80 kr, the stock volatility be 30% and the risk free interest rate be 6%. (a) Construct a one-year, five-step Binomial tree for the stock and calculate today’s price of the European at-the-money call. (c) The option can be replicated by a portfolio consisting of the stock and...
You buy a share of stock, write a one-year call option with X = $15, and...
You buy a share of stock, write a one-year call option with X = $15, and buy a one-year put option with X = $15. Your net outlay to establish the entire portfolio is $14.50. What must be the risk-free interest rate? What is the payoff? The stock pays no dividends. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT