THE NEXT THREE (3) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: Lindsay is considering buying a four-bedroom residential property as an investment. She thinks that rents over the next 4 years will be $26,000, $27,000, $28,000, and $31,000 per annum for the corresponding property she is looking at. Assume that rents are paid at the end of the year. She plans to sell the property at the end of 4 years for $675,000. The rate of return on comparable investments is 9.6% per annum, compounded annually. 5. Approximately how much is Lindsay willing to spend today to purchase this property, rounded to the nearest $100? (1) $383,500 (2) $477,700 (3) $556,800 (4) $731,900 6. Now assume that Lindsay is planning to buy this property and never sell it. Also, assume that she expects to always earn a rent of $29,000 per annum from the tenants of the residential property. If this is the case, how much would Lindsay be willing to spend to purchase this property, rounded to the nearest $100? (1) $302,100 (2) $437,600 (3) $566,000 (4) $599,300 7. Now assume that Lindsay thinks that she will earn a rent of $29,000 in the first year, and the rent that she earns will grow at a rate 2.6% per annum every year after. She will never sell the property. How much would Lindsay be willing to spend to purchase this property, rounded to the nearest $100? (1) $389,300. (2) $414,300 (3) $524,800 (4) $583,300
THE NEXT THREE (3) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: Lindsay is considering buying a four-bedroom residential property as an investment. She thinks that rents over the next 4 years will be $26,000, $27,000, $28,000, and $31,000 per annum for the corresponding property she is looking at. Assume that rents are paid at the end of the year. She plans to sell the property at the end of 4 years for $675,000. The rate of return on comparable investments is 9.6% per annum, compounded annually. 5. Approximately how much is Lindsay willing to spend today to purchase this property, rounded to the nearest $100? (1) $383,500 (2) $477,700 (3) $556,800 (4) $731,900 6. Now assume that Lindsay is planning to buy this property and never sell it. Also, assume that she expects to always earn a rent of $29,000 per annum from the tenants of the residential property. If this is the case, how much would Lindsay be willing to spend to purchase this property, rounded to the nearest $100? (1) $302,100 (2) $437,600 (3) $566,000 (4) $599,300 7. Now assume that Lindsay thinks that she will earn a rent of $29,000 in the first year, and the rent that she earns will grow at a rate 2.6% per annum every year after. She will never sell the property. How much would Lindsay be willing to spend to purchase this property, rounded to the nearest $100? (1) $389,300. (2) $414,300 (3) $524,800 (4) $583,300
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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Transcribed Image Text:THE NEXT THREE (3) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
Lindsay is considering buying a four-bedroom residential property as an investment. She thinks that
rents over the next 4 years will be $26,000, $27,000, $28,000, and $31,000 per annum for the
corresponding property she is looking at. Assume that rents are paid at the end of the year. She plans to
sell the property at the end of 4 years for $675,000. The rate of return on comparable investments is 9.6%
per annum, compounded annually.
5. Approximately how much is Lindsay willing to spend today to purchase this property, rounded to
the nearest $100?
(1) $383,500
(2) $477,700
(3) $556,800
(4) $731,900
6. Now assume that Lindsay is planning to buy this property and never sell it. Also, assume that she
expects to always earn a rent of $29,000 per annum from the tenants of the residential property. If
this is the case, how much would Lindsay be willing to spend to purchase this property, rounded to
the nearest $100?
(1) $302,100
(2) $437,600
(3) $566,000
(4) $599,300
7. Now assume that Lindsay thinks that she will earn a rent of $29,000 in the first year, and the rent that
she earns will grow at a rate 2.6% per annum every year after. She will never sell the property. How
much would Lindsay be willing to spend to purchase this property, rounded to the nearest $100?
(1) $389,300.
(2) $414,300
(3) $524,800
(4) $583,300.
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