Next year, in the good state of the world, one parcel of land is worth $130,000 and in the bad state of the world, one parcel of land is worth $30,000. Next year in the good state of the world, one housing unit is worth $250,000 and in the bad state of the world, one housing unit is worth $200,000. Next year, one housing unit will rent for $15,000 regardless of the state of the world. One housing unit currently costs $190,000 and the current risk free rate is 4.00%. How many housing units do you need to buy now to set up a replicating portfolio for land payouts next year?

Next year, in the good state of the world, one parcel of land is worth $130,000 and in the bad state of the world, one parcel of land is worth $30,000. Next year in the good state of the world, one housing unit is worth $250,000 and in the bad state of the world, one housing unit is worth $200,000. Next year, one housing unit will rent for $15,000 regardless of the state of the world. One housing unit currently costs $190,000 and the current risk free rate is 4.00%. How many housing units do you need to buy now to set up a replicating portfolio for land payouts next year?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 8P

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