Suppose rents in Dubai on an average 2-bedroom apartment are
about 120,000 AED per year. The rents are expected to grow at 3
percent per year forever and long term interest rates are at 5% per
year. If current apartment price is 20,000,000 AED, do you believe
this price to be a fair market price? What can be said about the
housing market under these circumstances?
5). Suppose you suspect gold price to have a bubble. Explain
what to look for. If there is a bubble in gold prices and the
bubble bursts, what is the bottom price you expect?
6). Suppose you are a Goldsmith and you want to become a banker.
If the gold withdrawal rate is 20 percent, how much in total can
you issue in gold paper receipts if you have 10,000 gold units?