Question
Your friend owns a beach house in San Diego. Its market value is $5,000,000. Your friend thinks that the local housing market has peaked and
Your friend owns a beach house in San Diego. Its market value is $5,000,000. Your friend thinks that the local housing market has peaked and that house prices will increase only at 3% over the next 5 years. He thinks that he can invest his money at a rate of return of 7%. What would you advise him to do? Why? Show calculations. You have $5,000,000 and you think that you can earn a return of only 2% on your investments. What will you do and why? Show calculations. What happens if housing prices in San Diego increase at 10%? Show calculations. What happens if housing prices in San Diego increase at 1%? Show calculations.
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