1. How much would you pay for the right to receive $80 at the end of 10 years if you can earn 15 percent interest?
a. $19.15.
b. $19.77.
c. $38.48.
d. $38.82.
e. $70.65.
2. How much would you pay to receive $50 in one year and $60 in the second year if you can earn 15 percent interest?
a. $88.85.
b. $89.41.
c. $98.43.
d. $107.91.
e. $110.00.
3. What amount invested each year at 10 percent annually will grow to $10,000 at the end of five years?
a. $1,489.07.
b. $1,637.97.
c. $1,723.57.
d. $1,809.75.
e. $2,000.00
4. What is the present value of $500 received at the end of each of the next three years and $1,000 received at the end of the fourth year, assuming a required rate of return of 15 percent?
a. $900.51.
b. $1,035.59.
c. $1,713.37.
d. $1,784.36.
e. $2,049.06.
5. Income multipliers:
a. Are useful as a preliminary analysis tool to weed out obviously unacceptable investment opportunities.
b. Are adequate as the sole indication of a property's investment worth.
c. Relate the property's price or value to aftertax cash flow.
d. None of the above.
6. The overall capitalization rate:
a. Is the reciprocal of the net income multiplier.
b. Incorporates the effect of mortgage financing.
c. Considers the risk associated with an investment opportunity.
d. All of the above are true.
7. A real estate investment is available at an initial cash outlay of $10,000 and is expected to yield
cash flows of $3,343.81 per year for five years. The internal rate of return is approximately:
a. 2 percent.
b. 20 percent.
c. 23 percent.
d. 17 percent
8. The net present value is equal to:
a. The present value of expected future cash flows, plus the initial cash outlay.
b. The present value of expected future cash flows, less the initial cash outlay.
c. The sum of expected future cash flows, less initial cash outlay.
d. None of the above.
9. Double taxation is most likely to occur if the income-producing properties are held in the form of a(n):
a. S corporation.
b. Limited partnership.
c. C corporation.
d. Real estate investment trust.
e. Limited liability company.
10. Which of the following ownership forms is the least able to flow through tax losses to investors?
a. S corporation.
b. Real estate investment trust.
c. Limited partnership.
d. Limited liability corporation.
11.Which of the following forms of ownership involve both limited and unlimited liability?
a. Limited partnerships.
b. Corporation.
c. General partnership.
d. Sole partnership.
e. None of the above.
12. Which statement is false concerning the limited partnership form of ownership?
a. The general partner has nearly complete control and is liable for debts and actions of the partnership.
b. The limited partners have no management control and are not liable except to the amount of their investment.
c. The limited partners cannot enjoy tax deduction benefits but the general partners can.
d. The partnership is not a taxable entity.
e. None of the above.
13. In most states, residential landlord-tenant laws have been enacted to:
a. Protect tenants from landlords.
b. Protect landlords from tenants.
c. Govern landlord-tenant relationships in apartment buildings having four or fewer units.
d. Establish standard provisions in residential leases.
e. Allow landlords to charge more rent.
14. Lessors who want to make sure their rents increase at least as fast as inflation would key their increases to which method?
a. Percentage of rental based on gross receipts.
b. Fixed rental.
c. Renegotiation rental at two-year intervals.
d. A general index of inflation.
e. A general index of construction costs.
15. The terms of ground leases are usually:
a. Less than five years.
b. Five to 10 years.
c. 10 to 12 years
d. Less than 20 years.
e. 20 to 99 years.
16. Current NOI for a 10-year-old retail center equals $50,000. After a $300,000 renovation, NOI should climb to $75,000. If the market capitalization rate equals 12 percent, what is the value of the center after renovation?
a. $625,000.
b. $500,000.
c. $350,000.
d. $600,000.
e. None of the above.
17. The optimal location for a soft-drink bottling plant is:
a. Near the source of raw materials (other than water).
b. Midway between the sources of raw materials and customers.
c. Near the markets for the product.
d. At the edge of a mountain range.
e. It doesn't matter; the plant could be located anywhere.
18. Which is not a function of real estate markets?
a. To allocate existing space.
b. To expand or contract space to meet changing conditions.
c. To determine land uses.
d. To delineate market boundaries.
e. All of the above.
19. Which characteristic of real estate is primarily responsible for the imperfect nature of real estate
markets?
a. Government.
b. Fixed location.
c. Market psychology.
d. Speculative bubbles.
e. Diversity of demand.
20. Real estate markets have been characterized by periods of dramatic overbuilding and shortage. Why have these boom-and-bust cycles occurred?
a. The cost of changing tenants is very high.
b. The costs of altering existing space is very high.
c. Construction periods are very long.
d. Changing plans during construction is very costly.
e. All of the above are correct answers.
21.Zoning is an exercise of which type of general limitation on property rights?
a. Eminent domain.
b. Taxation.
c. Police power.
d. Escheat.
e. All of the above.
22. In cities, the authority for approving site plans
for large projects usually rests with the
a. City council or commission.
b. Mayor or city manager.
c. Planning board or commission.
d. Planning board or commission staff.
e. Zoning review board.
23. Who normally pays to clean up sludge on a property?
a. The current property owner.
b. A former property owner.
c. The federal government.
d. The lender.
e. The state government.
24. Sludge includes:
a. Sewage waste only.
b. Sewage waste and naturally occurring gases.
c. Asbestos, lead paint, and fiberglass.
d. PCBs and LUSTs.
e. Any type of hazardous materials or gases.
25. A developer has a parcel of land near a metropolitan rail transit station. What type of study does the developer need to indicate the market potential for this parcel?
a. General market study.
b. Site-specific study in which the use is predetermined.
c. Financial analysis.
d. Highest and best use study.
e. Real estate appraisal.
26. Which is not one of the fundamental questions a market study should answer?
a. What type of financing is being offered in the market?
b. What size of units are purchasers or renters demanding?
c. What amenities are typical in the market?
d. What prices or rents are being asked in the market?
e. What architectural styles are being demanded in the market
27. For analyzing current and future supply in the market, analysts rely on:
a. Competitive market surveys and building permit data.
b. Primary data.
c. Secondary data with primary data.
d. Construction cost estimates.
e. All of the above.
28. The highest and best use of a vacant site is the specific improvement that will:
a. Maximize total property value.
b. Minimize total property value.
c. Maximize the rate of return to the total property.
d. Maximize site value.
e. Maximize the flexibility of the site's use.
29. The final price for each comparable property reached after all adjustments have been made is termed the:
a. Final estimate of value.
b. Final adjusted sale price.
c. Market value.
d. Indicated value.
e. Replacement value.
30. The final price from each appraisal approach is termed the:
a. Final estimate of value.
b. Final adjusted sale price.
c. Market value.
d. Indicated value.
e. Replacement value.
31. You have appraised a single-family residence using all three approaches to value. The indicated values are, respectively, sales comparison approach, $89,800; cost approach, $92,400; and gross rent multiplier analysis, $87,500. You decide the sales comparison approach is most reliable and should be weighted 50 percent. The cost approach is next in reliability, and it should be weighted 40 percent. GRM analysis should be weighted 10 percent. What is your final estimate of value (rounded to the nearest $100)?
a. $91,000.
b. $89,900.
c. $90,200.
d. $90,600.
e. $90,900.
32. A comparable property sold six months ago for $150,000. The adjustments for the various elements of comparison have been calculated as follows:
Location: -5 percent
Market conditions: +8 percent
Physical characteristics: +$12,500
Financing terms: -$2,600
Conditions of sale: -0-
Legal characteristics: -0-
Use: -0-
Non-realty items: -$3,000
What is the comparable property's final adjusted
sale price?
a. $160,732.
b. $164,400.
c. $169,600.
d. $162,500.
e. $163,232.
33. The most typical adjustment interval on an adjustable rate mortgage (ARM) is:
a. 6 months.
b. 1 year.
c. 3 years.
d. 10 years.
e. None of the above.
34. The dominant loan type originated by most financial institutions is the:
a. Fixed-payment, fully amortized mortgage.
b. Adjustable rate mortgage.
c. Purchase money mortgage.
d. FHA-insured mortgage.
35. Which of the following statements is true about 15-year and 30-year fixed payment mortgages?
a. 30-year mortgages are more popular than
15-year mortgages among home owners who are refinancing.
b. Borrowers pay more total interest over the
life of a 15-year mortgage than on a 30-year loan.
c. The remaining balance on a 30-year loan declines
more quickly than an otherwise comparable 15-year mortgage.
d. Assuming they can afford the payments on both mortgages,
borrowers should chose a 30-year mortgage over an otherwise identical
15-year loan if their risk-adjusted opportunity cost of equity exceeds the mortgage rate.
36.A mortgage that is intended to enable older households to "liquify" the equity in their home is the:
a. Graduated payment mortgage (GPM).
b. Adjustable rate mortgage (ARM).
c. Purchase money mortgage (PMM).
d. Reverse annuity mortgage (RAM).
37. Using financial leverage on a real estate investment can be for the purpose of all except:
a. Greater diversification.
b. Greater expected return on the leveraged investment.
c. Being able to acquire the property.
d. Reduction of financial risk for the leveraged investment.
38. If the property's NOI is expected to be $22,560, operating expenses are $12,250, andthe debt service is expected to be $19,987, the debt coverage ration (DCR) is approximately equal to:
a. 0.89.
b. 1.13.
c. 1.84.
d. 1.74.
e. None of the above.
39. A broker, who is the agent of a seller, must deal honestly and fairly with whom?
a. Only the seller.
b. The seller and the buyer.
c. The seller and a lender.
d. The seller and a title insurance company.
e. Everyone involved in the transaction.
40. According to most listing contracts, a broker has earned a commission when:
a. A contract for sale is signed by the buyer.
b. The transaction closes.
c. The broker finds a buyer, who is ready, willing, and able to buy on the terms specified in the listing contract.
d. The seller signs a listing contract.
e. The broker sends a bill for services rendered to the principal (usually the seller).