true or false: financial decision making is based on the concept of wealth maximization -
ANSWERtrue
true or false: the internal rate of return is the interest rate for which a project's net present value
(NPV) is exactly equal to zero - ANSWERtrue
true or false: initial equity is the purchase price less any debt used to complete the purchase -
ANSWERtrue
which of the following is not a characteristic of risk?
a) the later the cash flows are expected to be received, the greater the risk
b) the greater the uncertainty, the greater the risk
c) the shorter the expected holding period, the greater the risk
d) the greater the potential risk, the greater the potential return investors will expect - ANSWERc
to reduce the risk to the borrower, adjustable rate mortgages typically have
a) a wraparound clause
b) an interest rate cap
c) negative amortization
d) a prepayment clause - ANSWERb
when a mortgage loan with level periodic payments has been completely repaid by the maturity
date, it is said to be
a) fully amortized
b) capitalized
c) reamortized
d) depreciated - ANSWERa
, according to the NPV decision rule, an investor who is considering a project which has a net present
value of $1 would
a) reject the investment
b) accept the investment
c) be indifferent between accepting or rejecting the investment
d) lose more money on the investment - ANSWERb
the deduction of tax depreciation from taxable income tends to ____________ the capital gains upon
sale of the property
a) reduce
b) increase
c) defer
d) have no effect upon - ANSWERb
In a cash-flow projection, the net operating income is determined by starting with the gross potential
income, calculating the gross effective income and then
a) deducting vacancies and bad debts
b) adding depreciation
c) deducting operating expenses
d) deducting depreciation - ANSWERc
under the current tax rate law, residential real estate investments have a depreciable life of how
many
a) 27 years
b) 39 years
c) 31.5 years
d) 27.5 years - ANSWERd
true or false: the vacancy rate is defined as the amount of occupied space as a percentage of the
total amount of space - ANSWERfalse
true or false: the investor's required rate of return is the same as the interest rate on available
mortgage loans - ANSWERfalse
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