6. Norman R yerson makes a living by renovating 19" century buildings and leasing them to banks, which he has found to be a particularly profitable type of income-producing property. Having no equity investments at the moment, R yerson is searching Torontos Port Lands for a new project. He discovers a suitable building at the intersection of Cherry and Polson Streets and is contemplating its purchase, for a current price of $9, 000, 000.00. If he does, hELONe will also, on the day of sale, put an additional 1, 000, 000.00 for renovation costs into a designated bank account from which the only withdrawals will be for this purpose, and by doing so avoids any need for obtaining a mortgage. Norman strongly believes, with a ninety percent likelihood, that he will earn a 20% return on his total investment by the end of one year from purchase. He does entertain the possibility that he would earn less than that, or even wind up with a worthless building at the end of the year. His thinking somewhat muddled by a day spent in the nearby Polson Street Pub, he finds that he cannot precisely forecast what the probabilities would be of all the possible returns less than his desired 10% so being a highly prudent (risk-averse) investor he decides to act as if the worst-case scenario is the sole alternative, placing the residual probability on that outcome. Making his decision to invest or not invest on this basis, he forecasts the end-of-year mean value, in dollars, of proceeding with the investment and, based on his current wealth, his personal financial welfare if he does proceed.

1. What does he calculate for this mean value?
2. If Norman could actually receive this mean value by selling a futures contract to some other investor, would he be better or worse off by doing that or just proceeding with his risky investment?*

7. Still undecided about whether to invest or not, Norman spots Doug Ford, another investor in Ontario income properties, at the end of the bar. He asks Ford what he should do in regard to his project. After listening to the project details, Ford offers to pay Norman a fee today in exchange for the rights to the project. After a moments thought, Norman decides that he would be willing to transfer the project rights today for a minimum of 8, 000, and 000.00. Elon loves to speculate on commercial real estate, so Norman believes that he would accept this deal at that price.

a.Would Norman be better or worse off if he accepts $8, 000, and 000.00 from Tesla for the project rights rather than investing himself?

b. Would Ford really be willing to pay Norman $8, 000, 000.00 for the project rights?

PLEASE ANSWER QUESTION 7. QUESTION 6 IS ALREADY ANSWERED. IT IS THERE FOR INFORMATIONAL PURPOSE WITH REGARDS TO THE QUESTION