30 HR Section 11 Quizzes

The risk that the required return on investor capital will not be met is called ______ risk. A) Business B) Capital C) Financial D) Leverage

A) Business

Dynamic and static risk are considered ________ risks. A) Business B) Capital C) Financial D) Insurance

A) Business Dynamic and static risks are types of business risks. One is insurable, the other is not.

Joaquim analyzed a potential opportunity and determined that if he invested $250,000 in the commercial property, he'd likely see a return of 12% on this investment. After several years, Joaquim is seeing a measly 2% return. What type of risk did he fall victim to? A) Business risk B) Capital risk C) Financial risk D) Leverage risk

A) Business risk

In terms of investment, liquidity means an investment ______. A) Can easily be converted to cash B) Can't be sold C) Is a cash cow D) Will experience ebbs and flows in value

A) Can easily be converted to cash

Which of the following do investors like to avoid? A) High tax liabilities B) Long-term appreciation C) Positive cash flow D) Tax write-offs

A) High tax liabilities

What is capital risk? A) The risk that an investor cannot secure financing at an affordable rate B) The risk that is directly related to leverage C) The risk that the property has a bad location D) The risk that the required return on investor capital will not be met

A) The risk that an investor cannot secure financing at an affordable rate A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity.

What is the definition of "before-tax cash flow"? A) Cash flow after property taxes are considered. B) Cash flow before property taxes are considered. C) Cash flow before taking income taxes into account. D) Cash flow taking income taxes into account.

C) Cash flow before taking income taxes into account.

For which of these properties would gross rent multiplier be calculated? A) Apartment building with 50 units B) Condominium building with 20 units C) Duplex used as a rental property D) Single-family, owner-occupied home

C) Duplex used as a rental property Remember, rent has four letters. Gross rent multiplier is used for income-producing properties with four or fewer units. Properties with five or more units use gross income multiplier.

The risk that is directly related to leverage is called ______ risk. A) Business B) Capital C) Financial D) Leverage

C) Financial

An investor is analyzing a three-unit property by looking at its ability to produce future income. Which of the following would most likely be used to determine this value? A) Effective gross income B) Gross income multiplier C) Gross rent multiplier D) Potential gross income

C) Gross rent multiplier

What is interest? A) A quantity chosen as a standard in terms of which other quantities may be expressed. B) A value describing one quantity in terms of another quantity. C) Money paid consistently at a particular rate for the use of borrowed money. D) Provides protection against possible damage.

C) Money paid consistently at a particular rate for the use of borrowed money.

Which of these terms can be defined as what a buyer has paid for a property and what the seller has accepted? A) Appraisal B) Cost C) Price D) Value

C) Price

Yanni is an investor who has just purchased a building for $300,000. Similar buildings are returning a rate of 7%. What can Yanni anticipate his annual net operating income to be? A) $18,700 B) $21,000 C) $30,000 D) $7,000

B) $21,000

A 30-unit income-producing property has a sales price of $6 million. Annual gross income is estimated at $500,000. What's the gross income multiplier? A) 10x B) 12x C) 14x D) 8x

B) 12x

What is dynamic risk? A) An insurable business risk that includes insuring for accident liability, fire, theft, and vandalism B) An uninsurable business risk resulting from economic, tax, and market changes C) The risk that an investor cannot secure financing at an affordable rate D) The risk that is directly related to leverage

B) An uninsurable business risk resulting from economic, tax, and market changes

"Income received before expenses are deducted" is the definition of ______. A) Effective gross income B) Gross income C) Net income D) Taxes

B) Gross income

A property has 10 units and is 90% occupied. Rent is $500 per month. Total vacancy and collection loss equals 10%. What's the potential gross income? A) $4,500 B) $5,000 C) $54,000 D) $60,000

D) $60,000

You're working with buyers who are pre-approved for a loan up to $90,000. If they estimate paying $525 per month toward interest, what interest rate are they assuming? A) 171% B) 43% C) 6% D) 7%

D) 7%

Which type of business risk is insurable? A) Capital B) Dynamic C) Financial D) Static

D) Static

You know a property's effective gross income and its operating expenses. How would you calculate the net operating income? A) Add income to tax deductions. B) Multiply annual return by .05 of the property's value. C) Multiply monthly income by 12. D) Subtract operating expenses from effective gross income.

D) Subtract operating expenses from effective gross income.

Brendan's lender set him up with a loan in which the majority of Brendan's early payments go toward interest, his monthly payments remain the same, and he doesn't start paying much toward his principal until closer to the end of the loan. This is ______. A) A sub-prime loan B) Illegal C) Predatory lending D) Typical amortization

D) Typical amortization

Which of the following can be defined as what a property is worth? A) Appraisal B) Cost C) Price D) Value

D) Value