REAL 4000: Test 2 And 3 Dietz
Questions with All Correct Answers
2026-2027 Updated.
1. Magnitude
2. Timing
3. Riskiness
of expected cash flows - Answer Value of a property or mortgage thus depends on:
- "Time Zero" - Answer TVM timelines always starts with
30 years - Answer Mortgage (debt) timelines normally
3-7 years - Answer Most commercial property ownership
PV - Answer Amount at time "zero"
FV - Answer A single cash flow at any future time point
PMT - Answer A repeating amount of cash inflow or outflow, flow normally begins at end of
first period, sometimes at time zero
N - Answer This is the measure of time and the number of computations (compounds)
I/Y - Answer Interest Rate, required return, rate of return, opportunity cost, discount rate,
IRR, etc. This is some sort of rate (%) of return (yield) based on risk
Ordinary annuity - Answer a fixed amount of money paid or received at the end of every
period. Often another name for fixed PMT.
Lump sum payment - Answer Any future cash inflow or outflow occurring only once (often
another name for FV).
FV of Lump Sum Formula - Answer (1 + r)^n
,future value of an annuity formula - Answer (1 + r)^n - 1 / r
Present value of a lump sum - Answer 1 / (1 + r)^n
Present value of annuity - Answer 1-[1/(1 + r)^n] / r
1. find the PVs of six different cash flows and sum the results
2. PV of a five-year $10,000 annuity + PV of a lump sum of $100,000 in year 5
3. Solve as a combined PV problem - Answer ways to solve for time "zero"
1. find the PVs of six different cash flows and sum the results
2. Solve using the variable cash flow capacity of your calculator (CF and NPV buttons)
3. Use a spreadsheet - Answer when cashflow is uneven:
higher rate of return - Answer the lower the price of a property =
the lower the rate of return - Answer the higher the price of a property =
directly - Answer risk and return are ____________ related
land speculation
hospitality
restaurants - Answer what property types are considered high risk?
AAA rated mortgage bonds
Net leased to AAA tenant - Answer what property types are considered low risk?
apartments
offices - Answer what property types are considered medium risk?
7-8% or less (investment grade of 3%) - Answer high quality (safe real estate investments)
30% of more - Answer development quality
NPV - Answer is a measure of change in an investors wealth
, good investment - Answer positive NPV
indifferent investment - Answer zero NPV
bad investment - Answer negative NPV
1. The amount and frequency of payments
2. The loan balance at any given time
The first two allow us to calculate the next three:
3. The lender's yield (%)
4. The borrower's effective borrowing cost (%)
5. The present value of debt payments
FOCUS ON 1,2,5 theyre the ones on the test - Answer Five Vital Characteristics Related to
Mortgages
the courts - Answer Mortagage foreclosure goes through...
Genericization - Answer mortgages often are:
Florida, South Carolina, and Louisiana - Answer states with mortgages:
Georgia, Tennessee, North Carolina - Answer states with deed of trusts:
Alabama - Answer which state allows both mortgages and deeds of trust?
Amortization - Answer the action or process of reducing or paying off a debt with regular
payments
(principle reduces with every payment)
risk - Answer The possibility that the actual outcome will vary from what was expected when
the asset was purchased.
Amortized 30 year mortgage (loan) - Answer -360 Months
-Higher interest rate than 15 year
Questions with All Correct Answers
2026-2027 Updated.
1. Magnitude
2. Timing
3. Riskiness
of expected cash flows - Answer Value of a property or mortgage thus depends on:
- "Time Zero" - Answer TVM timelines always starts with
30 years - Answer Mortgage (debt) timelines normally
3-7 years - Answer Most commercial property ownership
PV - Answer Amount at time "zero"
FV - Answer A single cash flow at any future time point
PMT - Answer A repeating amount of cash inflow or outflow, flow normally begins at end of
first period, sometimes at time zero
N - Answer This is the measure of time and the number of computations (compounds)
I/Y - Answer Interest Rate, required return, rate of return, opportunity cost, discount rate,
IRR, etc. This is some sort of rate (%) of return (yield) based on risk
Ordinary annuity - Answer a fixed amount of money paid or received at the end of every
period. Often another name for fixed PMT.
Lump sum payment - Answer Any future cash inflow or outflow occurring only once (often
another name for FV).
FV of Lump Sum Formula - Answer (1 + r)^n
,future value of an annuity formula - Answer (1 + r)^n - 1 / r
Present value of a lump sum - Answer 1 / (1 + r)^n
Present value of annuity - Answer 1-[1/(1 + r)^n] / r
1. find the PVs of six different cash flows and sum the results
2. PV of a five-year $10,000 annuity + PV of a lump sum of $100,000 in year 5
3. Solve as a combined PV problem - Answer ways to solve for time "zero"
1. find the PVs of six different cash flows and sum the results
2. Solve using the variable cash flow capacity of your calculator (CF and NPV buttons)
3. Use a spreadsheet - Answer when cashflow is uneven:
higher rate of return - Answer the lower the price of a property =
the lower the rate of return - Answer the higher the price of a property =
directly - Answer risk and return are ____________ related
land speculation
hospitality
restaurants - Answer what property types are considered high risk?
AAA rated mortgage bonds
Net leased to AAA tenant - Answer what property types are considered low risk?
apartments
offices - Answer what property types are considered medium risk?
7-8% or less (investment grade of 3%) - Answer high quality (safe real estate investments)
30% of more - Answer development quality
NPV - Answer is a measure of change in an investors wealth
, good investment - Answer positive NPV
indifferent investment - Answer zero NPV
bad investment - Answer negative NPV
1. The amount and frequency of payments
2. The loan balance at any given time
The first two allow us to calculate the next three:
3. The lender's yield (%)
4. The borrower's effective borrowing cost (%)
5. The present value of debt payments
FOCUS ON 1,2,5 theyre the ones on the test - Answer Five Vital Characteristics Related to
Mortgages
the courts - Answer Mortagage foreclosure goes through...
Genericization - Answer mortgages often are:
Florida, South Carolina, and Louisiana - Answer states with mortgages:
Georgia, Tennessee, North Carolina - Answer states with deed of trusts:
Alabama - Answer which state allows both mortgages and deeds of trust?
Amortization - Answer the action or process of reducing or paying off a debt with regular
payments
(principle reduces with every payment)
risk - Answer The possibility that the actual outcome will vary from what was expected when
the asset was purchased.
Amortized 30 year mortgage (loan) - Answer -360 Months
-Higher interest rate than 15 year
