Question: I need the whole calculation so I can learn how to do this one. Thank you! Task Assume that the price of real estate is

I need the whole calculation so I can learn how to

I need the whole calculation so I can learn how to do this one. Thank you!

Task Assume that the price of real estate is determined by P=PV(all cash flows generated by the real estate) After you have graduated you work for some years and can save some money. You decide to invest in a house which you want to rent out for a rate of SEK 12000 per month. Assume that the rental rate will increase with 1.2% per year (which is 0.1% per month). (For the sake of simplicity, also assume that there are no further costs involved e.g. renovating or repair). a) As the market risk of renting out the house is low, you think that a discount rate of 3.5% (APR with monthly compounding) would be appropriate. What is the price of the house under the assumption that the cash flows from rent will last forever? Answer: the price of the house under these assumptions is SEK 6.26 million. (round to

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