A Japanese residential investment property has an expected nominal total return of 2% pa and nominal net rental yield of 1.5% pa. Inflation is expected to be -0.5% pa. Note the negative sign. This means that there is deflation in Japan.

All of the above rates are nominal effective rates and investors believe that they will stay the same in perpetuity.

Which of the following statements is NOT correct? All numbers are rounded to 4 decimal places.

Select one:

a. The nominal expected capital return is 0.5% pa.

b. The real expected capital return is 0% pa.

c. The real expected total return is 2.5126% pa.

d. The real expected net rental return is 1.5075% pa.

e. In nominal and real terms, the house price is expected to increase.