1. Show formally what happens to the intrinsic value (P*) in the following two cases: () the rate of return becomes zero high and (i) when an asset ceases to pay dividends from period t+1 onwards. Provide a clear economic explanation for both cases.
2. How might the Gordon model be used to explain in Irish house prices over the last 25 years, and specifically to assess the existence of "bubbles" in the market? What do you think are some of the weaknesses of the Gordon model?