Consider the Following to Answer the Question(s) Below

question 21

Multiple Choice

Consider the following to answer the question(s) below:
A landowner is considering a community development project. Even though he realizes that the current market for housing is not very favourable, he believes that there will be an influx of retirees into the area within the next five years. He is trying to decide between two alternatives: (1) building detached homes in a planned retirement community or (2) building a smaller townhouse/condominium complex. Mortgage interest rates will affect his outcomes and the applicable payoff (in $ millions) table is shown below.
-Based on the expected value approach, the landowner should

• A) build townhouses/condominiums if interest rates stay about the same.
• B) build detached homes in a planned retirement community.
• C) build townhouses/condominiums if interest rates go down.
• D) build townhouses/condominiums.
• E) build townhouses/condominiums if interest rates go up.

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