Calculate value of option to buy the commercial building

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Reference no: EM131933978

Question: On April 15, 2015 you purchased an option which will allow you to buy a commercial building on January 10, 2019 for $12 million. Your current estimate of the value of the commercial building is $9 million. The annual volatility for the change in the commercial building's value is 25% and the risk-free rate is 14%.

Calculate the value of the option to buy the commercial building.

Reference no: EM131933978

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