Finance quiz 6
An easement gives the owner of one property the legal use of another property Select one: True False
True
If a property has interest payments of $1,500 per year, how is the cash flow for the investor calculated? Select one: a. Deducting the interest from the Net Income b. Interest should be ignored, the Net Income is the cashflow c. Gross income less interest d. Add back interest to the Net Income e. None of the above
a
The Lessor is the: Select one: a. Tenant. b. Owner of the property. c. Property developer. d. Flatmate. e. Representative of the Council.
b
In the final year of a 5 year cashflow projection, how is the cashflow line calculated? Select one: a. The same as for the earlier years b. Net income less interest c. Net income less interest, plus end value less any debt repayment d. Sale price less debt repayment e. None of the above
c
The internal rate of return of a property investment: Select one: a. will always exceed the required rate of return b. will always be less than the required rate of return c. makes the net present value equal to zero d. reduces as the discount rate increases e. increases as the discount rate increases
c
When allowing for changes in property value as well as income in calculation of a single period return: Select one: a. Change in value is multiplied by income and the product is divided by the initial property value. b. Income is divided by the final property value. c. Change in value is added to income and the product is then divided by the initial property value. d. Change in value is divided by income. e. Economic indicators are used to value the property.
c
Real estate markets are considered to be imperfect because Select one: a. Buyers and sellers are not always well informed b. Each property is relatively unique c. There is imperfect competition for any one property d. All of a, b, and c e. Some buildings are not readily reproduced
d
Real estate markets are considered to be imperfect because Select one: a. Buyers and sellers are not always well informed b. Each property is relatively unique c. There is imperfect competition for any one property d. All of a, b, and c e. Some buildings are not readily reproduced
d
Which of the following is NOT a factor that affects specific risk in property? Select one: a. Tenant quality. b. Lease quality. c. Age and condition of building. d. Interest rates. e. Location.
d
Which of the following is NOT a feature of a perfectly competitive market? Select one: a. knowledgeable buyers and sellers b. a homogenous and divisible commodity c. competitive, arm's length bidding process d. high transaction costs e. zero information costs
d
Which of the following is NOT an example of an easement? Select one: a. A property benefiting from stormwater pipes to provide drainage through another property. b. A property benefiting from sewer pipes to provide wastewater disposal through another property. c. Adjoining properties each benefiting from a party wall. d. A restriction that indicates there is uncertainty as to where the boundary lines are. e. All of the above are examples of easements.
d
Which of the following is true? Select one: a. The bundle of rights is indivisible. b. Property ownership rights are absolute. c. Restrictive covenants are examples of government controls placed on real estate. d. Zoning is an example of a government restriction.
d
A gross lease requires the tenant to pay: Select one: a. rental plus rates b. rental plus a share of operating expenses c. a percentage share of gross income d. rental exclusive of operating expenses e. rental inclusive of operating expenses
e
If a 5 year cashflow returns a positive Net Present Value (NPV): Select one: a. The required rate of return (the discount rate) was achieved b. The Internal Rate of Return (IRR) is lower than the required rate of return c. The investment meets the investor's criteria and can be accepted d. The sum of the discounted cashflows is less than the outlay e. Both a and c
e
Ownership of land is often compared with a bundle of sticks because: Select one: a. Each stick represents a property right. b. The government does not need to hold any sticks as they have the power of eminent domain. c. With fee simple title, all the sticks are held by the property owner. d. None of the above. e. All of a, b and c are correct.
e
Property markets are generally considered to be an imperfect market and therefore less efficient due to: Select one: a. Very low liquidity b. Relatively few buyers and sellers with infrequent transactions c. Complexity and heterogeneity of property assets d. High transaction costs e. All of the above
e
Property markets are generally considered to be an imperfect market and therefore less efficient due to: Select one: a. Very low liquidity b. Relatively few buyers and sellers with infrequent transactions c. Complexity and heterogeneity of property assets d. High transaction costs e. All of the above
e
The bundle of rights includes: Select one: a. the right to occupy, exclude others, or to sell. b. the right to borrow against. c. the right to convey by inheritance. d. None of the above. e. All of a, b and c are correct.
e
Which of the following statement(s) indicate that real estate is NOT a perfectly competitive market? Select one: a. Pricing information is poor and not quickly disseminated b. Transaction costs are low c. Property is a heterogeneous product d. Property is a homogenous product e. Both A and C indicate that real estate is not a perfectly competitive market
e
With a _____ the lessor is responsible for all building operating expenses, whereas with a _____, the lessee is responsible for part or all of building operating expenses. Select one: a. ground lease; gross lease b. freehold ownership; leasehold arrangement c. tenacy in common; joint tenancy d. capital lease; income lease e. gross lease; net lease
e
The owner of a freehold estate has exclusive rights to occupancy for a defined period of time. Select one: True False
false
