Final answer:
The fair market value of the property is calculated using the rental yield formula and is found to be $84,000, based on the provided monthly rent of $840 and the annual rental yield of 12%.
Step-by-step explanation:
The question asks us to find the fair market value of a property, given that its monthly rent is $840 and the annual rental yield is 12%. To determine the market value, we use the formula for rental yield:
Rental Yield = (Monthly Rent × 12) / Market Value
So,
12% = ($840 × 12) / Market Value
To find the Market Value, rearrange the formula:
Market Value = ($840 × 12) / 0.12
Now, plug in the numbers to calculate the value:
Market Value = ($840 × 12) / 0.12
Market Value = $10080 / 0.12
Market Value = $84,000
The fair market value of the property is therefore $84,000.