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A house that is financed with a below-market loan is available for sale. The value of the house will be higher than similar properties regardless of the other terms of the loan. One benefit of leverage is that it allows […]

The U.S. is the only country that allows REITs (or similar investments). The future value of a $1 annuity compounded at 5% annually is greater than the future value of a $1 annuity compounded at 5% semi-annually. Answer: FALSE Given […]

Housing futures contracts allow investors to speculate on changes in home prices without actually owning a home. ARMs were developed because lenders were tired of offering a limited selection of loan alternatives to borrowers. Answer: FALSE Capital accounts are debited […]

Assume you have a choice between investing in either an equity REIT or Microsoft stock (MSFT). Which point in the figure above is NOT on the efficient portfolio frontier? (a) A (b) B (c) C (d) All points are on […]

One way in which a mortgage pay-through bond (MPTB) is similar to a mortgage-backed bond (MBB) is that the pay-through bond is a debt obligation of the issuer. Home equity loans do not require a mortgage lien on the property. […]

Which of the following statements about the loan in the question above are TRUE? (a) The market value of the loan is higher than the book value of the loan because the market rate of interest is lower than the […]

The marginal rate of return can be defined as the: (A) Return that results from holding the property for one additional year (B) IRR the year the internal rate of return starts to decrease from holding the property (C) Incremental […]

An investor calculates an incremental return of renovating a building of 14%. Other properties provide a 12.5% overall rate of return to equity investors. Therefore, the property is a good investment. Generally, prices for zero coupon mortgage-backed bonds are more […]

In order to calculate the APR for an ARM, you must, (A) Only use the first year’s given interest rate (B) Estimate interest rates over the life of the loan (C) Assume the worst case scenario and use interest rates […]

The existing stock of space cannot be adjusted in the short run, but can be increased or decreased in the long run. General industry standards for a conventional loan specify a maximum LTV of 60 percent. Answer: FALSE At least […]

Which of the following was NOT stated as contributing to the complication of estimating amount of interest carry? (A) The loan is drawn and interest is calculated on drawn amount (B) Revenue from each type of site varies (C) The […]