Reference no: EM131155729

QUESTION 1:-

You are considering a purchase of two practically identical properties. Both properties have and are expected to generate the same net income. Property (1) has a cap rate of 9 while property (2) has a cap rate of 7. It is reasonable to assume that property (1) is overvalued relative to property (2).

•True
• False

QUESTION 2:-
You are searching for a commercial property to buy in Brooklyn. You have narrowed your search down to three properties. Property (1) has a cap rate of 7, property (2) has a cap rate of 8, and (property (3) has a cap rate of 6. Property (3) must be the better choice because the cap rate implies that property (3) has the highest net operating income of the three properties.

•True
• False

QUESTION 3:-
Property managers can do nothing to increase property cap rates since cap rates are determined by market forces.

•True
• False

QUESTION 4:-
The risk associated with a property's net income will affect its cap rate.

•True
• False

QUESTION 5:-
You should never buy an income producing property that has a cap rate that is low relative to other properties in the neighborhood.

•True
• False

QUESTION 6:-
Use Excel to solve this problem.

•rate 10%
•nper 30
•pv $350,000
•fv 0
•type 0

The periodic payment the borrower will have to make is greater than $42,185.23

•True
• False

QUESTION 7:-
•rate 10%
•nper 30
•pv $350,000
•fv 0
•type 0
 
If the rate increases from 10% to 15% the periodic payment will increase by less than 50%.
Use Excel to solve this problem.
•True
•False

QUESTION 8:-
Use Excel to solve this problem
•rate 10%
•nper 30
•pv $350,000
•fv 0
•type 0

If the number of periods is reduced to 15 from 30 the periodic payment will double.
•True
•False

QUESTION 9:-
•rate 10%
•nper 30
•pv $350,000
•fv 0
•type 0

The interest payment at the end of period 2 is greater than the interest payment at the end of period 7.
You should use Excel to solve this problem.
• True
• False

QUESTION 10:-
•rate 10%
•nper 30
•pv $350,000
•fv 0
•type 0

The principal payment at the end of period 2 is greater than the principal payment at the end of period 7.
• True
• False

QUESTION 11:-
time       cash flows       discount rate
0           $400,000.00     25%
1           $75,000
2           $75,000
3           $75,000
4           $75,000
5           $75,000
6           $75,000
7           $75,000
8           $75,000
9           $75,000
10         $525,000
 
You are working for a real estate investment firm. The rule is the following: Invest in properties that have a positive net present value based on ten-year cash flow projections. Should you invest in this project?

•Yes
•No

QUESTION 12:-
time    cash flows     discount rate
0        $400,000.00   10%
1        $75,000
2        $75,000
3        $75,000
4        $75,000
5        $75,000
6        $75,000
7        $75,000
8        $75,000
9        $75,000
10      $525,000

You are working for a real estate investment firm. The rule is the following: Invest in properties that have a positive net present value based on ten-year cash flow projections. Should you invest in this project?
•Yes
•No