Fin 3301 trinidad mid term

Assume that a piece of land is currently valued at $50,000. If this piece of land is expected to appreciate at an annual rate of 5% per year for the next 20 years, how much will the land be worth at the end of 20 years? Multiple choice question.

$132,665

Jenny wants to go to Europe four years from now. She can save $4,000 per year, beginning one year from today. She plans to invest the funds in the S&P 500 index fund that she thinks will return 10% per year. Under these conditions, how much will she have saved after she makes the 4th deposit, 4 years from now? Multiple choice question.$

$18,564

The average annual return for the S&P 500 since its inception in 1928 through 2014 is approximately 10%. assume a person invested $1.00 in S&P 500 Index in the end of 1928. It would have grown to $ __________ in the end of 2014

$3628.87

Suppose a firm expects to receive the following cash flows over the next four years: Year 1: $1,200 Year 2: $1,200 Year 3: $1,500 Year 4: $1,000 Discount rate=10% What is the present value of this uneven cash flow stream? (round to the nearest cent)

$3892.63

examples of market failure due to incomplete info about construction quality includes:

- non-visible electrical systems once walls are up - inability to examine plumbing under a concrete slab floor

Ben Franklin invested 1,000 pounds (about $50,000 today) at the beginning of the year 1785. Assume the average annual return he earned from 1785 to the end of 1984 (200 years) was 2.4%. How much was Franklin's investment worth at the end of 1984? (Round your answer to the nearest cent). Multiple choice question.

$5,740.653.48

You just inherited some money, and a broker offers to sell you an annuity that pays $5,200 at the beginning of each year for 20 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity today?

$65,560

in zoning a non-conforming use

- must have existed before the zoning was enacted - cannot be discontinued more than a. limited time - cannot change in use or structure

future benefits are discounted because of

- risk - opportunity cost

example of natural monopolies

- water company - electric utility

three types of traditional land use controls are:

- zoning - building codes - subdivision regulations

An investor originally paid $22,000 for a vacant lot 12 years ago. If the investor is able to sell the lot today for $63,000, what would be her annual rate of return (rounded to the nearest full percent)?

9%

an example of market failure due to externalities is:

a water bottling plant consumes so much well water that it lowers the water table on neighboring land

an example of a negative externalities is

reflective glass or roof material defects light and heat onto adjacent properties

Arbitrage means taking advantage of temporary differences in market prices to make a profit. Assume two real estate companies, A and B, both operate in New York area and focus on office properties. You have determined that Company A's shares have an intrinsic value of $20 per share but are trading at $22 per share, while Company B's shares are worth $25 per share but are trading at $22 per share. What would a rational investor (or an arbitrageur) do to take advantage of this price difference (no short-selling constraint and transaction fee)?

sell short company A's shares, buy the same number of company B's shares

an example of market failure due to incomplete info is:

the buyer of a house doesn't know that the electrical wiring is aluminum and prone to cracking - a fire hazard

which is the clearest example of a-positive externality

the effect on a neighborhood from good lawn maintenance

a major reason for subdivision regulations is that usually the responsibility for maintaining streets and sewers eventually falls to

the local government

police powers

the power of state and local government in the US to regulate in the interest of the health and safety and welfare of citizens in general