(TCO 9) The marginal rate of return for a property is ________.
(TCO 9) A property could be sold today to provide an after-tax cash flow from sale of $800,000. The after-tax cash flow from operations next year is $40,000. If sold next year, the property is expected to provide an after-tax cash flow of $824,000. What is the marginal rate of return for holding the property for an additional year?
(TCO 9) A property could be sold today to provide an after-tax cash flow from sale of $800,000. The after-tax cash flow from operations next year is $40,000. If sold next year, the property is expected to provide an after-tax cash flow of $900,000. What is the marginal rate of return for holding the property for an additional year?
(TCO 9) A property could be sold today to provide an after-tax cash flow from sale of $800,000. The current after-tax cash flow from operations is $20,000, which is expected to grow by 4% per year. If sold next year, the property is expected to provide an after-tax cash flow of $824,000. What is the marginal rate of return for holding the property for an additional year?
(TCO 9) ________ can help an investor make a decision whether or not renovation is feasible and if refinancing should be used.
(TCO 9) An investor is considering renovating a building. The total cost of renovation is expected to be $120,000, of which 75% can be borrowed. Given the after-tax cash flows to the equity investor as showed below, what is the incremental return from renovating?
(TCO 9) Which of the following factors would NOT be considered when an investor is trying to decide whether to hold or sell a property at the end of year five?
(TCO 9) The return calculated assuming the property is held for one additional year is referred to as the ________.
(TCO 9) Which of the following is NOT a benefit of refinancing?
(TCO 9) An investor is considering refinancing a property. The current mortgage has an interest rate of 8.75% and a mortgage balance equal to 45% of the property value due to amortization of the loan and some appreciation in value. However, the investor would like to refinance at an amount equal to 75% of the property value. He has found out that the property can be refinanced at a 75% loan-to-value ratio over 15 years. What can be said about the incremental cost of refinancing?
(TCO 9) An investor purchased a building ten years ago when the building could be depreciated over 19 years. A new investor is interested in purchasing the building after the depreciable life according to tax laws changed to 15 years. Assuming both investors are in the same tax bracket and that everything else is equal, what can be said about the after-tax cash flow received by the new investor as compared to the after-tax cash flow that would be received by the original owner of the building?
(TCO 9) A strategy for deferring the recognition of capital gains when a property is sold is the use of a _______.
(TCO 9) When the profit ratio is less than 1, _______.
(TCO 9) If an investor takes a rehabilitation tax credit and disposes of a property during the first five years after a rehabilitated building has been placed in service
(TCO 7) Consider the figure above. The difference between the existing stock of space and Point D represents ________.
(TCO 7) The difference between the existing stock of space and the equilibrium occupancy is known as ________.
(TCO 7) A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year. Using a 11 percent discount rate, what is the effective rent over the three years?
(TCO 7) A building owner charges net rent of $20 in the first year, $21 in the second year, and $22 in the third year, but is providing six months of free rent in the first year as a concession. Using a 8 percent discount rate, what is the effective rent over the three years?
(TCO 7) A clause which requires a tenant in retail space to achieve a certain level of sales or the lease will be terminated is referred to as a ________.
(TCO 7) Which of the following does the term anchor tenant usually refer to?
(TCO 7) Which of the following is TRUE for a net lease?
(TCO 7) Assume comparable sales data shows that a capitalization rate of .095 is optimal. If a subject property has a NOI of $27,500, what value would a cap rate approach yield (rounded)?
(TCO 7) Which of the following factors is NOT part of the definition of market value?
(TCO 7) Which of the following steps normally would be used in the cost approach to value?
(TCO 7) Capitalization rates will differ from yield rates when the income is expected to __________ over time.
(TCO 7) Consider a building with a very long economic life. Assume at the end of year 6, NOI will be $80,000 as is expected to grow at a rate of 2 percent per year. You company’s required rate of return is 12%. As part of your analysis, you must calculate the reversion value (REV) at the end of year 5, which would be ________.
(TCO 7) Which of the following statements regarding equity is T RUE?
(TCO 7) A property that produces a level of NOI of $200,000 per year is expected to be sold in year 5 for $2,000,000. If the property was purchased for $2,000,000, what is the IRR using the operating income only?
(TCO 7) A property that produces an annual NOI of $90,000 was purchased for $1,200,000. Debt service for the year was $95,000 of which $93,400 was interest and the remainder was principal. Annual depreciation is $38,095. What is the taxable income?
(TCO 3) A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5%. What would the monthly payment be?
(TCO 3) A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5% and monthly payments.
What portion of the first month’s payment would be applied to interest?
(TCO 3) A borrower has a 30-year mortgage loan for $300,000 with an interest rate of 6% and monthly payments. If she wants to pay off the loan after 8 years, what would be the outstanding balance on the loan?
(TCO 3) A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus 4 points. What is the effective annual interest rate on the loan if the loan is carried for all 30 years?
(TCO 3) A borrower obtains a $175,000 reverse annuity mortgage with monthly payments over 10 years. If the interest rate of the mortgage loan is 8%, what is the monthly payment received by the borrower?
(TCO 3) Risk is an important component of interest rates. Which of the following risks is NOT a determinant of interest rates?
(TCO 3) One of the most popular amortizing mortgages today is the constant payment mortgage. Which of the following characterizes the components of the CPM payment over the life of the loan?
(TCO 3) Over the life of the loan, which of the following loans would continually have a lower principal balance given each loan had the same term, principal amount, and average interest rate?
(TCO 3) APR stands for which of the following?
(TCO 4) If an ARM index increased 15%, the negative amortization on a loan with a 5% annual payment cap is calculated by
(TCO 4) Which of the following clauses leads to higher risk for an ARMs lender?
(TCO 4) Under which scenario is negative amortization likely to occur?
(TCO 4) When a lender sets a maximum reduction in payments or interest rates on reset dates, these are called ________.
(TCO 4) Examples of indexes that can be used to reset the interest rate on an ARM include all but ________.
(TCO 8) Under which conditions would one be MOST LIKELY to see an interest rate swap?
(TCO 8) A lender requires a 1.20 debt coverage ratio as a minimum. If the net operating income of a property is $60,000, what is the maximum amount of debt service the lender would allow?
(TCO 8) A property is financed with a 75% loan at 11.5% over 25 years. The property produces an ATIRR on total investment of 8.34% based on a tax rate of 31%. What can be said about the leverage associated with the property?
(TCO 8) A property produces an 8.92% ATIRR on the total investment considering a tax rate of 28%. What is the maximum interest rate that could be paid on debt without causing the leverage to be negative?
(TCO 8) Which of the following is also referred to as a negative amortization loan?
(TCO 8) A lender requires a 1.20 debt coverage ratio as a minimum. If the net operating income of a property is $65,000, what annual amount of debt service would provide the required debt coverage ratio?
(TCO 8) Which of the following typically would NOT be used as a basis for a participation loan?
(TCO 8) Which of the following gives the lender an option to purchase a full or partial interest in the property at the end of some specified period of time?
(TCO 8) Which of the following refers to the risk real estate investors face stemming from changes in general economic conditions?
(TCO 8) When sales exceed a breakpoint sales volume in a retail lease with percentage rent, the additional rent is referred to as ________.
(TCO 8) 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 ________.
(TCO 8) Due diligence means that an investor will ________.
(TCO 8) Consider an investment in which a developer plans to begin construction of a building one year if, at that point, rent levels make construction feasible and the building will cost $1 million to construct. There is a 50% chance that NOI will be $160,000 and a 50 percent chance that NOI will be $80,000. Using the traditional approach, similar to the “highest and best use” approach, what would be the land value of the property at the beginning of the first year, assuming a cap rate of 9% (11% discount rate and an NOI growth rate of 2%)?
(TCO 8) Consider an investment in which a developer plans to begin construction of a building one year if, at that point, rent levels make construction feasible and the building will cost $1 million to construct. There is a 50% chance that NOI will be $160,000 and a 50 percent chance that NOI will be $80,000. Using the traditional approach, similar to the “highest and best use” approach, what would be the land value of the property today, assuming a cap rate of 10 percent (12% discount rate and an NOI growth rate of 2%)?
(TCO 5) Which of the following is TRUE regarding the incremental cost of borrowing?
(TCO 5) A house is for sale for $250,000. You have a choice of two 20-year mortgage loans with monthly payments: (1) if you make a down payment of $25,000, you can obtain a loan with a 7% rate of interest or (2) if you make a down payment of $50,000, you can obtain a loan with a 5% rate of interest. What is the effective annual rate of interest on the additional $25,000 borrowed on the first loan?
(TCO 5) A borrower secured a 30 year, $150,000 loan at 8% with monthly payments. Fifteen years later, an investor wants to purchase the loan from the lender. If market interest rates are 5%, what would the investor be willing to pay for the loan?
(TCO 5) Loan refinancing decisions must consider ________.
(TCO 5) A borrower made a mortgage loan 7 years ago for $160,000 at 10.25% interest for 30 years. The loan balance is now $151,806.62 and rates for this amount are currently 9.0% for 23 years. Origination fees and closing costs are $4,500 and closing costs are not financed by the lender. What is the effective cost of refinancing?
(TCO 5) A loan was made 10 years ago for $140,000 at 10.5% for a 30 year term. Rates are currently 8%. What is the market value of the loan?
(TCO 5) A home equity loan is a loan in which a residential property owner can
(TCO 6) A conforming loan
(TCO 6) A jumbo loan ________.
(TCO 6) Which of the following groups customarily does NOT attend real estate closing?
(TCO 6) RESPA requires lenders to disclose to buyers a good faith estimate of certain closing costs within ________.
(TCO 6) A typical RESPA closing statement contains which of the following characteristics?
(TCO 6) The calculated APR represents the ________.
(TCO 6) There are times when a borrower may be able to receive a lower interest rate on a mortgage note in exchange for a ________.
(TCO 3, 4) If you deposit $2,000 in an account that earns 5% per year, compounded annually, you will have $2,553 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly?
(TCO 3, 4) Ten years ago, you put $150,000 into an interest- earning account. Today, it is worth $275,000. What is the effective annual interest earned on the account?
(TCO 3, 4) Your friend has a trust fund that will pay him $500,000 at the end of 10 years. Your friend, however, wants his money today. He promises to sign his trust fund over to you if you give him some money today. You require a 20% interest rate on money you lend to friends. How much would you be willing to lend under these terms?
(TCO 3, 4) A deposit placed in an interest-earning account earning 8% a year will double in value in ______ years.
(TCO 3, 4) At the end of 8 years, your friend wants to have $75,000 saved for a down payment on a house. He expects to earn 8%, compounded monthly, on his investments over the next 8 years. How much would your friend have to put in his investment account each month to reach his goal?
(TCO 3, 4) Your friend just won the lottery. He has a choice of receiving $50,000 a year for the next 20 years or a lump sum today. The lottery uses a 15% discount rate. What would be the lump sum your friend would receive?
(TCO 3, 4) The future value of $1,000 compounded annually for 9 years at 12% may be calculated with the following formula:
FV = $1,000 * (1 + 12%)9
If the same $1,000 was compounded quarterly, what formula would you use to calculate the FV?
(TCO 3, 4) If you saw a table containing the following factors, what kind of interest factor would you be looking at?
(TCO 3, 4) The future value of a single deposit of $1,000 will be greater when this amount is compounded ________.
(TCO 3, 4) Begin with a single sum of money at period 0. First, calculate a future value of that sum at 12.01%. Then discount that future value back to period 0 at 11.99%. In relation to the initial single sum, the discounted future value ________.
(TCO 3, 4) The future value compound factor given for period (n) at 15% ________.
(TCO 3, 4) The interest rate used to compute the present value of a future cash flow is called the ________.
(TCO 3, 4) Which one of the following will increase the future value of a lump sum invested today?
(TCO 3, 4) A series of equal cash flows that occur at the beginning of each time period for a limited number of time periods is called a(n) ________.
(TCO 3, 4) Compound interest is defined as the interest earned
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(TCO 9) The marginal rate of return for a property is ________.
(TCO 9) A property could be sold today to provide an after-tax cash flow from sale of $800,000. The after-tax cash flow from operations next year is $40,000. If sold next year, the property is expected to provide an after-tax cash flow of $824,000. What is the marginal rate of return for holding the property for an additional year?
(TCO 9) A property could be sold today to provide an after-tax cash flow from sale of $800,000. The after-tax cash flow from operations next year is $40,000. If sold next year, the property is expected to provide an after-tax cash flow of $900,000. What is the marginal rate of return for holding the property for an additional year?
(TCO 9) A property could be sold today to provide an after-tax cash flow from sale of $800,000. The current after-tax cash flow from operations is $20,000, which is expected to grow by 4% per year. If sold next year, the property is expected to provide an after-tax cash flow of $824,000. What is the marginal rate of return for holding the property for an additional year?
(TCO 9) ________ can help an investor make a decision whether or not renovation is feasible and if refinancing should be used.
(TCO 9) An investor is considering renovating a building. The total cost of renovation is expected to be $120,000, of which 75% can be borrowed. Given the after-tax cash flows to the equity investor as showed below, what is the incremental return from renovating?
(TCO 9) Which of the following factors would NOT be considered when an investor is trying to decide whether to hold or sell a property at the end of year five?
(TCO 9) The return calculated assuming the property is held for one additional year is referred to as the ________.
(TCO 9) Which of the following is NOT a benefit of refinancing?
(TCO 9) An investor is considering refinancing a property. The current mortgage has an interest rate of 8.75% and a mortgage balance equal to 45% of the property value due to amortization of the loan and some appreciation in value. However, the investor would like to refinance at an amount equal to 75% of the property value. He has found out that the property can be refinanced at a 75% loan-to-value ratio over 15 years. What can be said about the incremental cost of refinancing?
(TCO 9) An investor purchased a building ten years ago when the building could be depreciated over 19 years. A new investor is interested in purchasing the building after the depreciable life according to tax laws changed to 15 years. Assuming both investors are in the same tax bracket and that everything else is equal, what can be said about the after-tax cash flow received by the new investor as compared to the after-tax cash flow that would be received by the original owner of the building?
(TCO 9) A strategy for deferring the recognition of capital gains when a property is sold is the use of a _______.
(TCO 9) When the profit ratio is less than 1, _______.
(TCO 9) If an investor takes a rehabilitation tax credit and disposes of a property during the first five years after a rehabilitated building has been placed in service