Download Real Estate Investment & Finance (Canadian version) Practice Exam and more Exams Lease Finance and Investment Banking in PDF only on Docsity!
Practice Exam
As with the Chapter Review Tests and the Final Exam, the Practice Exam tests your understanding of the materials underlying the learning objectives. After you’ve reviewed your answers to the Chapter Review Tests, try your hand at this 50-question Practice Exam to become still more comfortable with taking a multiple-choice test. Remember, topics covered in this exam may likewise be covered in the Final Exam, but the wording of the questions will never be identical.
- The land description method that measures distance and direction from an established reference point is the: a. township lot and concession. b. metes and bounds system. c. rectangular survey system. d. lots and blocks system.
- What is the approximate future value of $15,000 at 9% for 11 years?
a. $28, b. $38, c. $38, d. $40,
- With regard to taxation, the basis of an asset is the:
a. market value. b. cost of improvements. c. purchase price. d. depreciable amount.
- The annual debt service on a 20-year loan is $37,240. The principal amount is $1,000,000. What is the loan constant? a. 0. b. 0. c. 0. d. 0.
- Money left to compound at 5% interest will require approximately how long to double in value? a. 12 years b. 13 years c. 14 years d. 16 years
- ABC company purchases inexpensive land and builds its factory on that land. It anticipates a rate of growth that will require it to move to a newer and larger location within approximately 50 years. It expects to sell the present land and building for a profit at that time. What kind of ROI does this represent? a. compound ROI b. capital ROI c. investment ROI d. aggregate ROI
- Project risk can be evaluated most accurately through the use of:
a. professional consultant reports. b. interviews with prospective contractors. c. analytically generated capitalization rates. d. comparisons with similar projects.
- In a mortgage loan transaction, the mortgagor is the:
a. seller. b. lender. c. borrower. d. intermediary.
- (Fill in the blank) In the five Cs of credit, the fundamental financial strength of a borrower is __. a. capital b. capacity c. character d. conditions
- A debt service ratio of 1:21 indicates that income to make debt service payments is:
a. ample. b. insufficient. c. exactly enough. d. sufficient if unexpected expenses are few.
- The best way for a property manager to make decisions is to:
a. minimize risk by making rational decisions. b. eliminate risk by postponing decisions. c. take risks as a way to maximize profit. d. minimize risk by following popular opinions.
- The actual rate of return of a series of cash flows generated by an investment is known as: a. loan amortization. b. net present value. c. internal rate of return. d. interest rate.
- Site management costs are charged back as part of the:
a. operating costs. b. basic rental cost. c. ongoing services. d. ancillary services.
- Which logic system is used in most handheld calculators?
a. reverse Polish notation b. chaining c. algebraic d. rational
- Based on the information below, which represents the first year’s principal portion of the payments? Amount of loan: $432, Annual interest rate: 9.33% per annum Amortization term: 13 years a. $16,548. b. $17,364. c. $18,152. d. $18,543.
- If the net present value of the future cash flows from an investment results in a negative amount, then the: a. expected rate of return has not been achieved. b. investment should be made. c. internal rate of return is greater than the expected rate of return. d. expected rate of return is too low.
- The type of lease commonly used for unique single-tenant buildings is the:
a. net lease. b. double-net lease. c. triple-net lease. d. gross lease.
- The final step in the life cycle costing calculation for a project is to divide the total expenses by the: a. escalation rate. b. single present worth factor. c. life expectancy. d. total savings.
- When the equity contribution to a project is small relative to the level of financing, the IRR: a. is an accurate way to measure performance. b. is the best way to measure performance. c. becomes disproportionately large. d. becomes disproportionately small.
- What gives a business its competitive advantage?
a. ability to duplicate b. being the largest c. core competencies d. diversification
- The best use of a satisfied tenant with a steady rental payment record is as a(n):
a. chance to reduce courtesy services. b. income source through unscheduled rent increases. c. chance to reduce annual maintenance. d. referral source for prospective tenants.
- (Fill in the blank) Highest and best use is the __ opinion of how the property may be used to create the highest value. a. appraiser’s b. owner’s c. potential owner’s d. lessee’s
- Based on the information below, which represents the first year's interest portion of the monthly payments? Amount of loan: $432, Annual interest rate: 9.33% per annum Amortization term: 13 years a. $37,891. b. $38,794. c. $40,050. d. $41,295.
- Which statement is true concerning calculations in life cycle costing?
a. the escalation rate is added to the inflation rate b. savings are expressed as negative numbers c. expense or savings are divided by the UPW (uniform present worth) d. the real interest rate is determined from a table
- Physical factors that function as financial variables in a property’s feasibility include all of the following except: a. legal/regulatory factors. b. tenant space factors. c. tenant organizational characteristics. d. landscaping factors.
- To be legally enforceable, a contract to purchase real estate must:
a. be in writing. b. involve unrelated parties. c. detail any financing. d. include insurance requirements.
- The lease that tends to be long-term (20 years or more) is the:
a. ground lease. b. net lease. c. gross lease. d. percentage lease.
- What is the present value of $1,500,000 discounted at 12% for 11 years?
a. $418, b. $421, c. $428, d. $431,
- An example of a fixed expense is:
a. cleaning. b. repairs. c. administration. d. insurance.
- The seller under a contract for deed is called the:
a. mortgagee. b. beneficiary. c. vendor. d. vendee.
- What is the adjusted basis for an investment property based on the following conditions?
Purchase price: $75, Improvements: $125, Accumulated depreciation: $55, Sales price: $325, a. $132, b. $145, c. $157, d. $195,
Practice Exam Answers
1. C
2. C
3. C
4. C
5. C
6. B
7. C
8. C
9. A
10. C
11. B
12. C
13. C
14. A
15. A
16. D
17. A
18. A
19. C
20. A
21. C
22. A
23. C
24. C
25. A
26. C
27. C
28. C
29. C
30. D
31. D
32. A
33. C
34. B
35. C
36. A
37. B
38. B
39. D
40. A
41. A
42. D
43. D
44. C
45. B
46. C
47. B
48. D
49. D
50. A
