6. You are considering an investment in an industrial property. Initially you defined the expected rent...

 

Transcribed Image Text:

6. You are considering an investment in an industrial property. Initially you defined the expected rent growth to be normally distributed with a mean of 3% and standard deviation of 2% and calculated your probability of reaching your expected IRR of 11.5% to be 48%. After a closer examination, due to many long leases in place, you have decided that the rent growth is better defined as being normally distributed with a mean of 2.5% and standard deviation of 1.5%. What is the probability of reaching your expected IRR of 11.5% using this new definition? a. 48% - The way rent growth is defined should not affect the IRR b. Higher than 48% - because the redefined standard deviation of rent growth is lower c. Higher than 48% - because the redefined mean of rent growth is lower d. Lower than 48% - because the redefined standard deviation of rent growth is lower e. Lower than 48% - because the redefined mean of rent growth is lower 6. You are considering an investment in an industrial property. Initially you defined the expected rent growth to be normally distributed with a mean of 3% and standard deviation of 2% and calculated your probability of reaching your expected IRR of 11.5% to be 48%. After a closer examination, due to many long leases in place, you have decided that the rent growth is better defined as being normally distributed with a mean of 2.5% and standard deviation of 1.5%. What is the probability of reaching your expected IRR of 11.5% using this new definition? a. 48% - The way rent growth is defined should not affect the IRR b. Higher than 48% - because the redefined standard deviation of rent growth is lower c. Higher than 48% - because the redefined mean of rent growth is lower d. Lower than 48% - because the redefined standard deviation of rent growth is lower e. Lower than 48% - because the redefined mean of rent growth is lower

Answer rating: 100% (QA)

At first the mean of lease development is 3 and stand... View the full answer