Now assume the discount rate changes to 5.5. what rule of, Ask an Expert

Economics

Suppose as a "rule of thumb" one commonly assumes that the value of land equals the 14-fold of its annual rental income. Assume the current rent is also equal what one would commonly expect for the future.

(a) What is the implicit discount rate for such a "rule of thumb?"

(b) Now assume the discount rate changes to 5.5%. What "rule of thumb" ratio between land value and annual rental income would you expect? find out.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M954932

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