1. A hotel investment is considered with a commensurate risk premium of 5.6%. The current market growth...
1. A hotel investment is considered with a commensurate risk premium of 5.6%. The current market growth rate is 2%. Knowing that the risk free rate in such market is 1.3%, what is the cap rate?
a) 5.6%
b) 4.9%
c) 3.3%
d) Impossible to calculate
Homework Answers
Answer: b) 4.9%
Cap rate = Risk free rate + Risk premium - growth rate
= 1.3% + 5.6% - 2%
= 4.9%
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