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Assume you are a real estate broker with an exclusive contract – the condo association rules state that everyone selling their condominiums must go through you. A typical condo sold at $400,000 today and sells again every 4 years. This contract will last for 20 years. Your commission will be 3.5%. Condos appreciate in value at a rate of 2.5% per year. The interest rate is 7% per annum. What is the value of this exclusivity rule for each condo – in other words, at what price should you be willing to sell the privilege of exclusive condo representation to another broker?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91726569

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