GAIA2 M2
D
In the classic definition of a perpetuity, what can be said about the income? It is infinite but not necessarily level. There is no discernible income pattern, it is just infinite income. It is finite and level. It is perpetual and level.
D
In the modern definition of a perpetuity, what can be said about the income? It is level and infinite. It infinite but not necessarily level. It is perpetual. It is finite and level.
D
The present value of the cash flow shown below is $400,000 at 4% interest. What income is sufficient for the return on investment the third year? Year Income. Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $19,000 $21,917 $16,000 $16,083
B
What is the value of an investment earning $100,000 per year in net income and a $500,000 reversion in ten years if the discount rate is 10%? $19,130,977.14 $807,228.36 $7,751,819.82 $1,464,055.34
C
What is the value of an investment earning $50,000 per year in net income and a $350,000 reversion in four years if the discount rate is 8%? $701,476.74 $2,336,012.62 $422,866.79 $2,302,517.85
C
If the discount rate is 10%, what is the return of capital in a first-year income of $100,000 for a $500,000 investment? $800,000 $250,000 $50,000 $10,000
A
If the discount rate is 10%, what is the return on capital in a first-year income of $15,000 for a $300,000 investment? $30,000 $35,000 $25,000 $50,000
D
If the discount rate is 10%, what is the return on capital in a first-year income of $20,000 for a $150,000 investment? $5,000 $2,000 $20,000 $15,000
A
If the discount rate is 14%, what is the return of capital in a first-year income of $150,000 for a $1,000,000 investment? $10,000 $140,000 $280,000 $150,000
D
What is the value of an investment earning $50,000 per year in net income and a $550,000 reversion in seven years if the discount rate is 8%? $4,644,583.25 $496,463.17 $3,522,712.43 $581,238.22
D
What is the value of an investment that generates $150,000 of net income annually, and has a $1,200,000 expected reversion in 10 years, if the discount rate is 9%? $962,648 $506,893 $1,384,337 $1,469,542
D
For the following property valued based on a 6% discount rate, how will the amount of the reversion compare to the return of the investment? Year Income Reversion 1 $60,000 2 $60,000 3 $60,000 4 $60,000 5 $60,000 $1,000,000 The reversion will cover only part of the return of investment. The reversion will cover all the return of investment and some return on investment. The reversion will occur equally throughout the holding period. The reversion will exactly equal the return of investment.
D
For the following property valued based on a 7% discount rate, when will the return of investment occur? Year Income Reversion 1 $60,000 2 $60,000 3 $60,000 4 $60,000 5 $60,000 $1,000,000 The reversion will occur equally throughout the holding period. The reversion will cover only part of the return of investment. The reversion will exactly equal the return of investment. The reversion will cover all the return of investment and some return on investment.
B
If the holding period is 35 years and the discount rate is 12%, what is the present value of an investment that consists only of a $50,000 reversion? no value $946.98 $50,000.00 $1.13
D
If the yield rate and the capitalization rate are the same, what is the relationship of the income and value? Income and value are expected to increase. Income and value are expected to decline. There is no identifiable pattern between the two rates. Neither income nor value are expected to change.
A
In a perpetuity, what is the capitalization rate relative to the yield rate? equal varies higher lower
B
Most surveys include which of the following discounting conventions? no identifiable convention annual, end-of-period discounting monthly end-of-period discounting annual, beginning of period discounting
A
What is the present value of an investment earning $50,000 per year if the reversion is $565,000, the holding period is 10 years, and the discount rate is 12%? $464,426 $704,096 $113,420 $1,000,000
B
What is the value of an investment earning $20,000 per year in net income and a $150,000 reversion in five years if the discount rate is 5%? $80,929.61 $204,118.46 $1,167,617.86 $1,176,694.94
C
What is the value of an investment earning $25,000 per year in net income and a $250,000 reversion in four years if the discount rate is 10%? $1,153,562.00 $79,246.64 $250,000.00 $1,095,723.77
A
What is the value of an investment earning $40,000 per year in net income and a $250,000 reversion in five years if the discount rate is 10%? $306,861.80 $177,302.05 $2,034,561.90 $151,947.15
D
What is the value of an investment earning $50,000 per year in net income and a $250,000 reversion in five years if the discount rate is 12%? $357,142 $837,864 $286,795 $322,095
C
What is the present value of an investment earning $10,000 per year if the reversion is $100,000, the holding period is eight years, and the discount rate is 10%? $704,096 $538,157 $100,000 $113,420
D
What is the present value of an investment earning $100,000 per year if the reversion is $1,000,000, the holding period is eight years, and the discount rate is 10%? $704,096 $113,420 $538,157 $1,000,000
D
The present value of the cash flow shown below is $400,000 at 4% interest. After return on investment, how much of the fourth-year income remains for the return of investment? Year Income. Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 -$5,870 $5,870 $5,000 $5,033
D
The present value of the cash flow shown below is $400,000 at 4% interest. After return on investment, how much of the second-year income remains for the return of investment? Year Income. Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 -$2,000 $2,000 $80 -$80
D
The present value of the cash flow shown below is $400,000 at 4% interest. After return on investment, how much of the third-year income remains for the return of investment? Year Income. Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $837 -$2,000 -$80 $2,917
D
The present value of the cash flow shown below is $400,000 at 4% interest. What income is sufficient for the return on investment the first year? Year Income Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $14,000 -$2,000 0 $16,000
A
The present value of the cash flow shown below is $400,000 at 4% interest. What income is sufficient for the return on investment the second year? Year Income. Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $16,080 $16,000 $15,920 $18,080
A
The present value of the cash flow shown below is $400,000 at 4% interest. What is the ending investment amount at the end of the second year? Year Income. Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $402,080 0 $402,000 $400,000
B
Why does risk usually increase as the holding period increases? Maintenance usually diminishes as a property ages. As a building ages, its maintenance costs increase and its useful life declines. Markets tend to decline over time. Future forecasts are less risky.
C
Why does risk usually increase as the holding period increases? Maintenance usually diminishes as a property ages. Future forecasts are less risky. Risk increases the further into the future a reversion is. As a building ages its maintenance costs decrease and its useful life increases.
D
For the following property valued based on a 5% discount rate, when will the return of investment occur? Year Income Reversion 1 $60,000 2 $60,000 3 $60,000 4 $60,000 5 $60,000 $1,000,000 The reversion will occur equally throughout the holding period. The reversion will cover all the return of investment and some return on investment. The reversion will exactly equal the return of investment. The reversion will cover only part of the return of investment.
D
If income and value are declining, what is the relationship of the capitalization rate and the yield rate? There is no identifiable pattern between the two rates. The capitalization rate is equal to the yield rate. The capitalization rate is lower than the yield rate. The yield rate is lower than the capitalization rate.
D
If income and value are expected to remain level over the investment holding period, what can be said of the capitalization rate and the yield rate? The capitalization rate will be higher than the yield rate. There is no identifiable pattern between the two rates. The yield rate will be higher than the capitalization rate. They will be equal.
D
If income and value are rising, what is the relationship of the capitalization rate and the yield rate? The capitalization rate is equal to the yield rate. There is no identifiable pattern between the two rates. The capitalization rate will be is higher than the yield rate. The yield rate is higher than the capitalization rate.
C
If the discount rate is 15%, what is the return of capital in a first-year income of $250,000 for an $800,000 investment? $37,500 $250,000 $130,000 $800,000
D
If the discount rate is 15%, what is the return-on capital in a first-year income of $25,000 for a $200,000 investment? $50,000 $25,000 $35,000 $30,000
C
If the discount rate is 7%, what is the value of an investment earning $25,000 per year in net income and a $200,000 reversion in five years? $357,142 $286,795 $245,102 $837,864
B
In the modern definition of perpetuity, which of the following statements is correct? The yield rate is higher than the capitalization rate. The capitalization rate and the yield rate are equal. There is no identifiable pattern between the two rates. The capitalization rate is higher than the yield rate.
D
The present value of the cash flow shown below is $400,000 at 4% interest. What is the ending investment amount at the end of the first year? Year Income Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $398,000 0 $400,000 $402,000
B
The present value of the cash flow shown below is $400,000 at 4% interest. What is the ending investment amount at the end of the last year? Year Income Reversion 1 $14,000 2 $16,000 3 $19,000 4 $21,000 5 $24,000 $385,895 $385,895 0 $409,895 $394,130
