REAL 5090 Final Exam Review With
Complete Solutions
cap rate approach - ANSWER cap rate - CAPX + interest - depreciation
risk premium approach - ANSWER bond - yield curve + Rp
What group provides demand in the space market? - ANSWER Tenants
What is the present value of a property with next year's NOI of $100,000, which
will grow at 3% per year and discounted at a rate of 8% - ANSWER $2,000,000
What group provides supply in the asset market? - ANSWER Owners selling
In the absence of foresight among asset market participants, a growth in the
demand for real estate assets in the capital market - holding demand in the
space usage market constant - will produce which of the following short-run
effects? - ANSWER A short-run increase in property asset prices
If the downtown Athens market for student housing is in equilibrium the day
before, what will happen to short term property prices in the asset market when
The Mark opens all of its units if demand stays constant in the space market? -
ANSWER A short-run decrease in property asset prices
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the nominal total return? - ANSWER 16.72%
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the nominal income return? - ANSWER some other amount (13.3%)
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
,Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the nominal appreciation return? - ANSWER some other amount (3.4%)
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the total real return? - ANSWER 11.16%
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
10) What is the real income return - ANSWER 12.68%
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the real appreciation return? - ANSWER -1.52%
If property market values are high enough in the asset market, which industry
will subsequently consider the construction cost and land to increase in the real
estate stock? - ANSWER Development industry
Capitalization rates are dampening mechanisms that tend to make the Real
Estate System self-regulating and inhibit it from spiraling out of control. -
ANSWER FALSE (negative feedback loops)
End of Year/ Account Balance
2010 / $4,103
2011 / $6,549
2012 / $4,987
What is the continuously-compounded annual return from the end of 2010 to the
end of 2012? - ANSWER 9.76%
, End of Year/ Account Balance
2010 / $4,103
2011 / $6,549
2012 / $4,987
What is the arithmetic average annual return from the end of 2010 to the end of
2012? - ANSWER 17.88%
End of Year/ Account Balance
2010 / $4,103
2011 / $6,549
2012 / $4,987
What is the geometric average annual return from the end of 2010 to the end of
2012? - ANSWER 10.25%
The IRR assumes that intermediate cash flows will be invested at the same rate
as the computed IRR - ANSWER TRUE
When solving for the present value given the future value, the problem is one of:
- ANSWER discounting
What is the present value of a 10-year lease with monthly rental payments of
$2,000 due at the end of each month, if the opportunity cost of capital is 8% with
monthly compounding? - ANSWER $164,843
Measuring ex ante returns is the same as measuring which of the following? -
ANSWER expected
Measuring ex post returns is the same as measuring which of the following? -
ANSWER past/ historical
The risk-free rate compensates investors for which of the following? - ANSWER
for the time value of money
CF / DATE
-100 - 12/31/2012
+10 - 2/28/2013
+100 - 12/31/2013
What is the equivalent annual nominal IRR of the above cash flows? - ANSWER
10.39%
An investor expects annual cash flows from a property as follows:
Year 1 / $20,000
Year 2 / $22,000
Complete Solutions
cap rate approach - ANSWER cap rate - CAPX + interest - depreciation
risk premium approach - ANSWER bond - yield curve + Rp
What group provides demand in the space market? - ANSWER Tenants
What is the present value of a property with next year's NOI of $100,000, which
will grow at 3% per year and discounted at a rate of 8% - ANSWER $2,000,000
What group provides supply in the asset market? - ANSWER Owners selling
In the absence of foresight among asset market participants, a growth in the
demand for real estate assets in the capital market - holding demand in the
space usage market constant - will produce which of the following short-run
effects? - ANSWER A short-run increase in property asset prices
If the downtown Athens market for student housing is in equilibrium the day
before, what will happen to short term property prices in the asset market when
The Mark opens all of its units if demand stays constant in the space market? -
ANSWER A short-run decrease in property asset prices
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the nominal total return? - ANSWER 16.72%
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the nominal income return? - ANSWER some other amount (13.3%)
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
,Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the nominal appreciation return? - ANSWER some other amount (3.4%)
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the total real return? - ANSWER 11.16%
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
10) What is the real income return - ANSWER 12.68%
Answer the next 6 questions using the following investment and annual
compounding: Property value at the end of 2012: $323,000
Property net rent paid at the end of 2013: $43,000
Property value at the end of 2013: $334,000
Inflation during 2013: 5%
What is the real appreciation return? - ANSWER -1.52%
If property market values are high enough in the asset market, which industry
will subsequently consider the construction cost and land to increase in the real
estate stock? - ANSWER Development industry
Capitalization rates are dampening mechanisms that tend to make the Real
Estate System self-regulating and inhibit it from spiraling out of control. -
ANSWER FALSE (negative feedback loops)
End of Year/ Account Balance
2010 / $4,103
2011 / $6,549
2012 / $4,987
What is the continuously-compounded annual return from the end of 2010 to the
end of 2012? - ANSWER 9.76%
, End of Year/ Account Balance
2010 / $4,103
2011 / $6,549
2012 / $4,987
What is the arithmetic average annual return from the end of 2010 to the end of
2012? - ANSWER 17.88%
End of Year/ Account Balance
2010 / $4,103
2011 / $6,549
2012 / $4,987
What is the geometric average annual return from the end of 2010 to the end of
2012? - ANSWER 10.25%
The IRR assumes that intermediate cash flows will be invested at the same rate
as the computed IRR - ANSWER TRUE
When solving for the present value given the future value, the problem is one of:
- ANSWER discounting
What is the present value of a 10-year lease with monthly rental payments of
$2,000 due at the end of each month, if the opportunity cost of capital is 8% with
monthly compounding? - ANSWER $164,843
Measuring ex ante returns is the same as measuring which of the following? -
ANSWER expected
Measuring ex post returns is the same as measuring which of the following? -
ANSWER past/ historical
The risk-free rate compensates investors for which of the following? - ANSWER
for the time value of money
CF / DATE
-100 - 12/31/2012
+10 - 2/28/2013
+100 - 12/31/2013
What is the equivalent annual nominal IRR of the above cash flows? - ANSWER
10.39%
An investor expects annual cash flows from a property as follows:
Year 1 / $20,000
Year 2 / $22,000
