How much less will your house be worth in five years compare

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Reference no: EM131905204

a) A one-year bond offers a yield of 6% and a two year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond next year?

b) You buy a house for $220,000 in a neighborhood where home prices have risen 5% annually on average. You suspect that growth in home prices will slow to an average of 3.5% per year over the next five years. If your growth estimate of 3.5% growth is correct, how much less will your house be worth in five years compared with 5% growth?

c) Beta Corp has an ROE of 15%; has just paid a dividend of $1.50; a pays 10% of its earnings out in dividends, and the appropriate discount rate is 20%; what is the current stock price?

Reference no: EM131905204

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