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REE 3043 TEST QUESTIONS WITH COMPLETE SOLUTIONS GRADED A+ €13,11
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REE 3043 TEST QUESTIONS WITH COMPLETE SOLUTIONS GRADED A+

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REE 3043 TEST QUESTIONS WITH COMPLETE SOLUTIONS GRADED A+ Investment Value Definition - Answer-Def: *The value of the property to a particular investor*. The price a particular investor (as opposed to the typical investor) is willing to pay, given the investor's unique tax situation, financing op...

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REE 3043 TEST QUESTIONS WITH
COMPLETE SOLUTIONS GRADED A+

Investment Value Definition - Answer-Def: *The value of the property to a particular
investor*.
The price a particular investor (as opposed to the typical investor) is willing to pay, given
the investor's unique tax situation, financing opportunities, required rate of return, and
expectations of the property's future cash flows.

Market Value Definition - Answer-Def: *Exact value.* The price a typical buyer would
pay should the property be placed on the market for sale.

Mortgage Value Definition - Answer-Def: present worth of the lender's rights to receive a
series of expected mortgage payments from the borrower over a specified period

Amortization Definition - Answer-Def: *A partial repayment of principle*

Capitalization Rate Definition - Answer-Def: The ratio between a property's Net
Operating Income (NOI) and it's value (acquisition price)

Debt Service Definition - Answer-Def: Loan payments paid to satisfy outstanding debt
(mortgage) obligations

Effective Cost Definition - Answer-Def: The true borrowing cost, including the effect of
up-front financing costs.

Effective yield Definition - Answer-Def: The yield actually earned by the investor.

Interest Definition - Answer-Def: The adjustment required to equate the value of money
received at 2 different points in time

Interest-only loans Definition - Answer-Def: Mortgage loans that do not require any
amortization of principle over the loan term

Internal Rate of Return (IRR) Definition - Answer-Def: The rate of interest (or discount
rate) which equates the present value of the cash inflows to the present value of the
cash outflows.

exceeds the investors required rate of return - Answer-If the NPV > 0, the project...

Loan Amortization Schedule Definition - Answer-Def: A table showing the breakdown of
a fixed mortgage payment between interest and the return of principle

, Net Present Value (NPV) Definition - Answer-Def: The difference between the present
value of the cash inflows and the present value of the cash outflows

Sinking fund factor Definition - Answer-Def: The adjustment used to find an annuity
payment

Yield to maturity Definition - Answer-Def: The yield (return) on an investment project if
held until maturity.

True - Answer-T or F: The value of income-producing property depends on its expected
cash flows, the timing of those cash flows, and the riskiness of those cash flows.

False. Investors earn return from rental income and property appreciation - Answer-T or
F: Real estate investors earn returns on their investments from 2 basic components:
income from the rental of the property and the tax sheltering characteristics of real
estate.

True - Answer-T or F: Investment "risk" is defined as the probability that actual cash
flows will differ from what was expected.

False. Most investors including real estate are risk averse. - Answer-T or F: most real
estate investors are risk seekers rather than risk averse

True - Answer-T or F: The outstanding balance on a mortgage loan can be calculated
as the present value of the remaining payments, discounted at the contract interest rate

True - Answer-T or F: A purchase price of 26,988 is required to achieve a return of 10%
per year if the expected selling price for a vacant parcel is 70,000 in 10 years (assuming
no transaction or holding costs)

False: The $1 deposit is worth $1.82 in 5 years (60 months) the calculation must be
done on a monthly basis - Answer-T or F: The value of a $1 deposit today that
accumulates at 12% per year compounded monthly is worth $1.76 in 5 years.

False: The correct answer is $12,234.57. Payments are received at the beginning of the
year - Answer-T or F: The future value of a $100 payment received as an annuity due,
discounted at 8% per year and received each year for 30 years is $11,328

False: The present value is $988,744. The amount received should be compounded
monthly - Answer-T or F: The present value of a property that is expected to tield $9000
at the end of each month (after expenses) for one year, and can be sold at the end of
the year for 1 million dollars (assume the market discount rate is 12% per year) is
$901,857

Fibonacci - Answer-Who created the formula used on calculators?

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