Stuart Michelson Has Invested in Several Pieces of Real Estate

question 23

Multiple Choice

Stuart Michelson has invested in several pieces of real estate. Which one of the properties that Stuart owns would be considered commercial real estate?

• A) 4 bedroom home that he does not rent out
• B) 20 acre tract of farm land that is sitting idle
• C) Fourplex that he rents to college students
• D) 100 acres of land in the mountains that he hopes to subdivide and sell as residential lots
• E) All of these can be considered commercial real estate.

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Definitions:

Risk Aversion

a preference for certain outcomes over uncertain ones, often characterized by the avoidance of risky situations.

Expected Value

A calculated average of all possible values for a random variable, taking into account their probabilities of occurrence.

Lottery

A form of gambling involving the drawing of numbers at random for a prize, often regulated by governments.

Adverse Selection

A situation in which one party in a transaction has more information than the other, often leading to a negative outcome for the less-informed party.