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You Take a Position with a Large Real Estate Development

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Essay

You take a position with a large real estate development company as your first job after graduation.Your first big assignment is to sell an office building - you have been informed the company's cost into the building (and the bottom line price it is willing to accept)is $400,000.You have identified a likely buyer and you assess that his top price is either $500,000 with a probability of .3,$600,000 with a probability of .5,or $1,000,000 with a probability of .2.You have to commit to a posted price - what price will maximize your profitability?


Definitions:

Monetary System

The set of institutions and mechanisms by which a country manages its currency and money supply, often involving a central bank and various types of money.

Efficient Economy

An economic system in which resources are allocated in the most productive way, maximizing the output of goods and services.

Federal Reserve Notes

The official currency issued by the Federal Reserve System in the United States, commonly known as dollars.

Fiat Money

Money not redeemable for any commodity; its status as money is conferred initially by government decree but eventually by common experience.

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