Hi!

Can you help me with this finance problem?

In a lecture on alternative investments, Bill made the following statements:

Statement 1:"The cap rates on properties are useful indicators about their income growth potential. These rates are somewhat analogous to the P/E multiple for a stock - stocks with greater earnings potential have higher multiples, just like properties with greater income potential have lower cap rates."

Statement 2:"The cap rate that investors are willing to accept is based on the current NOI and does not depend on how income might change in the future. The discount rate, on the other hand, is based on current and future NOI, and therefore it takes into account how future NOI might change."

a. Bill is accurate with respect to Statement 1 only.

b. Bill is accurate with respect to Statement 2 only.

c. Bill is accurate with respect to both Statements.