You are considering investing in Property B in question 5. Consider now that the listing price...

 

Transcribed Image Text:

You are considering investing in Property B in question 5. Consider now that the listing price of the property is $11 million. You know that the historical annual returns on this type of property has been 10%, and the historical risk premium on this type of property has been 5.5%. The prices of zero coupon Treasury Bonds are as follows: Prices of zero coupon treasury bonds (denomination $1,000) 8 1 2 3 4 5 6 7 9 10 $971 $934 $889 $839 $784 $725 $665 $604 $544 $485 = Maturity (yr) Price How much is the property worth? Is this a positive NPV investment?? You are considering investing in Property B in question 5. Consider now that the listing price of the property is $11 million. You know that the historical annual returns on this type of property has been 10%, and the historical risk premium on this type of property has been 5.5%. The prices of zero coupon Treasury Bonds are as follows: Prices of zero coupon treasury bonds (denomination $1,000) 8 1 2 3 4 5 6 7 9 10 $971 $934 $889 $839 $784 $725 $665 $604 $544 $485 = Maturity (yr) Price How much is the property worth? Is this a positive NPV investment??

Answer rating: 100% (QA)

SOLUTION To calculate the present value of the property we can use the formula for present val... View the full answer