1 What does the Risk Premium capture? (4 Points)

a The level of risk aversion of an investor

b The amount of risk that is not covered by an insurance.

c The impact that the risk could have on the project if realized.

d The difference in risk between the investment opportunity in question and a risk-free investment opportunity.

2 Which additional sources of risk can you find in real estate investment that you cannot find in the non-real estate market (e.g., stocks)? (4 Points)

a Physical elements of Risk.

b Missing information on future returns.

c Imprecise data for future incertainties.

d Unpredicted events influencing the profitability of the investment, e.g., a global pandemic.