1. A lender requires a 1.20 debt coverage ratio as a minimum. If the net operating income of a property is $45,000, what annual amount of debt service would provide the required debt coverage ratio?

$37,500 or higher

$37,500 or lower.

$54,000 or higher.

$54,000 or lower.

2. A graduated payment mortgage (GPM) would be most appropriate in all of the following circumstances except:

A young homebuyer whose income is expected to grow in real terms.

An inflationary environment where rents are likely to grow in nominal terms.

A declining neighborhood where property values are likely to decline.

A distressed property purchased by an investor who plans turn-around improvements.