REE6305 Real Estate Investment
Task:
1. Investment at current market price – Select and justify a reasonable required rate of return for the REIT you analyzed. Then, given the current REIT market price and the distribution inputs you defined, answer the following questions:
What is the probability that investors will earn a rate of return that is at least as high as their required rate of return?
What is the probability that investors will earn a rate of return that is at least as high as their required rate of return minus 2%?
What is the probability that investors will earn a rate of return that is at least as high as the current yield on 10-year treasuries?
What is the probability that investors will recognize an investment loss greater than 5% per year?
2. Valuation – Given the distribution inputs you defined, calculate the value of your REIT per share and explain your approach. Then, using the REIT’s value as an entry point for potential investors, answer the following questions:
What is the probability that investors will earn a rate of return that is at least as high as their required rate of return?
What is the probability that investors will earn a rate of return of at least 8% per year?
What is the probability that investors will recognize an investment loss greater than 2% per year?
Briefly summarize your findings and provide an investment recommendation.
