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Tut 17-Question 7

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asked Oct 31, 2016 in BUS 1003H - Introduction to Financial Risk by gifton (180 points)

Tut 17

Question 7

True or false?

1. Commercial property usually gets most of its returns from rent income rather than capital gains.

2. Prime property would be expected to have higher yields than non-prime property.

3. In commercial property rental, all repairs are normally at the cost of the tenant, not the owner.

1 Answer

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answered Oct 31, 2016 by gifton (180 points)

1. True.

2. False. Non-prime property has less desirable features and more risk compared to prime property, and since the greater the risk the higher the required rate of return then non-prime property would be expected to have higher yields. 

3. True. Since commercial property are rented on long term lease which can go for 100 years, all the repairs are normally at the cost of the tenant.

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