A retail park's current yearly rent is set at £271 thousand, which is due four months in advance. According to the terms of the lease, rent will rise on a regular basis every four years. The first increase, at a compound annual growth rate of 3.8%, is due in exactly four years. Additionally, after 20 years, the retail park reverts to the original owner at no additional cost.Based on an effective annual interest rate of 5.3%, determine the present value in thousands, to five decimal places, of the rental income that this investment will produce in the future.
A retail park's current yearly rent is set at £271 thousand, which is due four months in advance. According to the terms of the lease, rent will rise on a regular basis every four years. The first increase, at a compound annual growth rate of 3.8%, is due in exactly four years. Additionally, after 20 years, the retail park reverts to the original owner at no additional cost.Based on an effective annual interest rate of 5.3%, determine the present value in thousands, to five decimal places, of the rental income that this investment will produce in the future.
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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A retail park's current yearly rent is set at £271 thousand, which is due four months in advance. According to the terms of the lease, rent will rise on a regular basis every four years. The first increase, at a compound annual growth rate of 3.8%, is due in exactly four years. Additionally, after 20 years, the retail park reverts to the original owner at no additional cost.
Based on an effective annual interest rate of 5.3%, determine the
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