Question

The renewal probability is assumed to be 60% for a particular lease with 12 months vacant if the lease is not renewed. The expected vacancy at the end of the lease is:

(A)​4.8 months
(B)​7.2 months
(C)​9.0 months
(D)​12.0 months

Answer 1

(A) ​4.8 months

Step-by-step explanation:

After the expiration of a lease, a maximum of one third allowance is usually given.

Therefore, The expected vacancy at the end of this lease can be calculated as follows:

The expected vacancy = 60% × 12 × (2 ÷ 3) = 4.8 months

Therefore, the expected vacancy at the end of the lease is 4.8 months.