Suppose that you are trying to estimate the price of a house using information from the market prices of several houses that were recently sold in an open market. All houses are the same except for the lot size and Nearby Park Space. Property A has 1 nearby park space, a lot size of 2500 square feet, and a selling price of $210,000. Property B has 4 nearby park spaces, a lot size of 5000 square feet, and a selling price of $290,000. Property C has 2 nearby parks, a lot size of 4000 square feet, and a selling price of $250,000. Property D has 5 nearby park spaces, a lot size of 4000 square feet and a selling price of $280,000.

a) If the market is in equilibrium, use this information to estimate the market value of a property which has 3 nearby park spaces, and a lot size of 3000 square feet

b) Given that the number of units for properties A,B and C are 20, 50, and 70; the measured capitalization rates are 4%,4.5%, and 5%; and the selling prices are $3million, $7million, and $10million: (i) using the income approach to market value, estimate the market value of properties A-C (don't use information on selling price). (ii) if many buildings like A, B and C are available and they differ only in the number of units, is this market in equilibrium? (iii) A simple rule of thumb concerning cap rates is that they are equal to the borrowing interest rate plus a constant mark up. If interest rates were to rise by 1 percentage point over the next five years, how much capital gain or loss would the owner of B experience?

Please solve b)