Answer is E for Q2 and D for Q3

2. A real estate developer has 200 flats under construction to be completed at the end of 9 months. The current market conditions allow the developer to comfortably sell each unit at $5.5 million. The developer expects that the price standard deviation is 0.7746 . The developer's risk aversion factor is 0.04 . If the developer sells 150 units today, the expected future price is nearest: a) $5.24m b) $5.56m c) $5.71m d) $6.34m e) $6.70m 3. Suppose you own a vacant 50 -years old building. You consider renovating the building to a comparable property that is generating rental income of $30,000 per month. The renovation cost is estimated at $1.5 million. The annual rental income is expected to grow at a constant 5% per year for the indefinite future. The appropriate discount rate for the NOI after renovation is 16%. If YOU renovate immediately, the fair value of the old building is nearest: a) \$1.576 million b) $1.773 million c) $1.824 million d) $1.936 million e) \$2.217 million