JUST NEED TO ANSWER THE FIRST QUESTION, THE OTHER TWO QUESTIONS ARE FOR REFERENCE

1. In question 2, before selling his house, Bob meets Ann who owns a new real estate firm that charges lower fees but hires less experienced agents. If Bob uses Anns services, he will sell his house at lower selling cost (i.e. below 8%), but with higher risk. Assuming, Bob requires a 7% IRR from his housing investment, what is the highest selling cost he would agree on? Write your answer in percent but without the percent sign, e.g. if your answer is 0.0456 = 4.56%, write it as 4.56

Hint: its the same calculation as in question 3, but now you know that the IRR = 7% and you are solving for the selling cost its a small linear equation to solve.

2. You observe a 5% yield on a 2-year bond and a 10% yield on a 3-year bond. If the expectations hypothesis holds, what is the expected yield on a 1-year bond 2 years from now?

3. Bob is considering buying a home and selling it in one year. At t=0 he buys a house, the price is $100,000. At t=1 the house appreciates (i.e. the price goes up) by 20%, and Bob sells it.

Bob also pays transaction costs: buying costs are 5% of buying price, selling costs are 8% of selling price. Each time period is a year. Bob does not take any mortgages. Find the NPV of this project if the interest rate is 4%.