Question: If a certain property is put up for sale, there is a 50% chance it will sell for $900,000 and a 50% chance it will sell for $1,100,000.
a. What is the market value of this property?
b. What is the standard deviation of the random noise in this property's price as a percentage of its market value?
c. If the property sells for $900,000, what was the ex post NPV from the market value perspective for the seller and the buyer?
d. If the property sells for $1,100,000, what was the ex post NPV from the market value perspective for the seller and the buyer?
e. What is the ex ante NPV from the market value perspective?