Next year, in the good state of the world, one parcel of land is worth $130,000 and in the bad state of the world, one parcel of land is worth $30,000. Next year in the good state of the world, one housing unit is worth $250,000 and in the bad state of the world, one housing unit is worth $200,000. Next year, one housing unit will rent for $15,000 regardless of the state of the world. One housing unit currently costs $190,000 and the current risk free rate is 4.00%. How many housing units do you need to buy now to set up a replicating portfolio for land payouts next year?
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Next year, in the good state of the world, one parcel of land is worth $130,000 and in the bad state of the world, one parcel of land is worth $30,000. Next year in the good state of the world, one housing unit is worth $250,000 and in the bad state of the world, one housing unit is worth $200,000. Next year, one housing unit will rent for $15,000 regardless of the state of the world. One housing unit currently costs $190,000 and the current risk free rate is 4.00%. How many housing units do you need to buy now to set up a replicating portfolio for land payouts next year?
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