Question

Using the above information, which kind of investor would likely turn the greatest profit in this market, given that each of them purchased a house in this area at year 0?
a. A long-term investor, who wishes to hold onto the house for an extended period and rent it out in the meantime.

b. A house flipper, who will sell the house as soon as the market increases its value.

c. A moderate-term investor, who will sell the house once it reaches a certain price.

d. A cautionary investor, who will sell the house in order to minimize losses as soon as the prices begin to drop.

Answer 1

Answer:

The correct answer is (A)

Explanation:

People are more successful in housing business who invests for a longer period. Housing prices do not fluctuate rapidly which is why a long term investor who holds the house for a longer period will likely to earn greater profit compared to those who will hold the house for a short-term period. The short-term investor will earn profit but a small percentage whereas long-term investors will earn a greater profit which depends on how long they can hold on to the house.