Related to the Economics in Practice on p. 522: If the estate in the Chekhov play Uncle Vanya is earning 2 percent, the interest rate on suitable securities is 5 percent, and the securities are a better risk than the estate, a potential buyer should require the price of the estate be ________ until the equivalent return on the estate is ________.

Question

Quizplus · Accepted Answer

A potential buyer should require the price of the estate to be lowered until the equivalent return on the estate is greater than 5 percent. This is because if the estate is only earning 2 percent, it is not a good investment compared to other securities that offer a 5 percent return and are a better risk. To make it a more attractive investment, the price should be lowered so that the eventual returns are greater than 5 percent.

Related to the Economics in Practice on P