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11% 12% Monthly rent/unit 11.724% Ex. treasuries rate 13.816% 13% 14% 15% 16% Baseline = 16.4385% 17% 18% 19% 20% 21% 18.929% IRR: PV(NOI+REV-DS) 20.666% Input High Input Low

11% 12% Monthly rent/unit 11.724% Ex. treasuries rate 13.816% 13% 14% 15% 16% Baseline = 16.4385% 17% 18% 19% 20% 21% 18.929% IRR: PV(NOI+REV-DS) 20.666% Input High Input Low

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Consider the graph below – representing the effect monthly rent and expected treasury rate on the IRR of an investment in an income producing property.

Which input has a greater effect on the IRR of the investment.


a. Expected treasury rate – because it yields a smaller range of IRR
b. Expected treasury rate – because it negatively affects IRR while monthly rent positively affects IRR.
c. Monthly rent – because it can yield a higher overall IRR
d. Monthly rent – because it yields a larger range of IRR
e. No way to determine without knowing what the monthly rent or treasury rate will be

11% 12% Monthly rent/unit 11.724% Ex. treasuries rate 13.816% 13% 14% 15% 16% Baseline = 16.4385% 17% 18% 19% 20% 21% 18.929% IRR: PV(NOI+REV-DS) 20.666% Input High Input Low
Transcribed Image Text:11% 12% Monthly rent/unit 11.724% Ex. treasuries rate 13.816% 13% 14% 15% 16% Baseline = 16.4385% 17% 18% 19% 20% 21% 18.929% IRR: PV(NOI+REV-DS) 20.666% Input High Input Low
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