EXAM QUESTIONS WITH CORRECT
ANSWERS 100% VERIFIED GRADED
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CapitalizationmRatem-
mCORRECTmANSWERmAmratemusedmformconvertingmpropertymincomemintompropertymvalue
DiscountmRatem-
mCORRECTmANSWERmThemratemofmreturnmonmamrealmestateminvestment.mItmreflectsmthemcompensat
ionmnecessarymtomattractminvestorsmtomgivemupmliquidity.
Recapturemratem-
mCORRECTmANSWERmProvidesmformthemreturnmofmtheminvestmentminmthemwastingmportionmofmthem
asset.mthismismsimilarmtomthemdepreciationmratemformthemimprovment.
Overallm/ratem-
mCORRECTmANSWERmThemdirectmrelationshipmbetweenmannualmnetmincomemandmsalempricemormval
uemincludesmtehmpropermprovisionmformdiscountmandmrecapture.
Yeildmratem-
mCORRECTmANSWERmThemratemofmreturnmonmequitymcapital:musedminmreferencemtomreturnmonmequi
tyminvestmentsmasmopposedmtominterestmonmmortgagemloans
CapitalizationmRatemtakesmplacemwhen?m-
mCORRECTmANSWERmWhenmamratemismusedmtomconvertmincomemfrommpropertymintompropertymvalu
e.
Assumemthatmthemnetmincomemfrommamretailmstorempropertymism$9600mpermyearmandmthatmthempro
permcapitalizationmratemism12mpercent.mWhatmformualmdomyoumuse?mandmwhatmismthempropertymval
ue?m-mCORRECTmANSWERmCapitializationmratemV=I/R
, $9600/m.12=$80,000
V=I/Rm-mCORRECTmANSWERmValuem=mincome/rate
Ifmampropertysmannualmnetmincomemofm$9,600msellsmform$80,000mwhatmismthemrate?m-
mCORRECTmANSWERm$9600(income)/m$80000(mValue)m=m0.12m(rate)
Howmcanmthemnetmincomemnecessarymtomproducemamspecifiedmratemcanmbemfoundmhow?m-
mCORRECTmANSWERmbymmultiplyingmthemratembymthemvalue.
Capitalizationmismthemprocessmusedmtom-
mCORRECTmANSWERmconvertmincomemintomanmestimatemofmvalue
FixedmRatemMortgagem-
mCORRECTmANSWERmAmloanmsecuredmbymrealmpropertymfeaturingmanminterestmratemthatmismconstan
tmformthemtermmofmthemloanmismreferredmtomas
Anticipationm-
mCORRECTmANSWERmThemunderlyingmprinciplemprovidingmthembasismofmthemincomemcapitalizationm
approachmis
Thembasicmequationmusedminmthemincomemapproachmtomvaluemism-
mCORRECTmANSWERmincome/rate=value
Deficitmrentm-
mCORRECTmANSWERmWhenmmarketmrentmexceedsmcontractmrentmthemdifferencemismknownmas