#2 MULTIPLE CHOICE (no need to show work but please getright)

1. A property recently sold for $444,000 (cashequivalent) and had $65,700 in potential gross income (PGI) for thefollowing year. The expenses were 33% of the effective gross income(EGI). The vacancy and collection losses were estimated at 5%. Whatis the overall capitalization rate (RO)?

a) 9.42%

b) 9.91%

c) 14.06%

d) 14.93%

2. The subject is located in a market where lenders aremaking commercial loans on properties like the subject at 8.5% peryear with monthly payments and a 20-year amortization with a 75%loan-to- value ratio. The equity dividend rate (RE) in this marketis 10%. What is the overall capitalization rate?

a) 8.50%

b) 8.88%

c) 10.00%

d) 10.31%

3. If the overall capitalization rate is 9.5%, themortgage constant is 7.755%, and the loan-to-value ratio is 80%,what is the equity dividend rate (RE)?

a) 7.76%

b) 8.10%

c) 9.50%

d) 16.48%

4. If the loan-to-value ratio is 75%, the mortgagecapitalization rate (RM) is 10.55%, and the debt coverage ratio(DCR) is 1.25, what is the implied capitalization rate based on thedebt coverage formula (underwriter’s method)?

a) 7.91%

b) 8.44%

c) 9.90%

d) 10.55%

5. A property sold for $2,345,000. The net operatingincome (NOI) is $255,000, and the expenses are 35% of the effectivegross income (EGI). What is the effective gross income multiplier(EGIM)?

a) 4.60

b) 5.98

c) 9.20

d) 17.07

6. The subject property is expected to generate netoperating income (NOI) over the next five years as shown in thefollowing table. The resale of the property is estimated at $5million at the end of the fifth year. The closing costs areestimated at 5% of the sale price. The discount rate is 9.5%. Cashflows are at the end of each year. What is the value of thisinvestment? Round your answer to the nearest $1,000.

Year	Net Income
1	$ 250,000
2	$ 300,000
3	$ 350,000
4	$ 400,000
5	$ 450,000
Resale	$4,750,000
Disc. Rate	9.50%

a) $3,904,000

b) $4,065,000

c) $4,327,000

d) $4,500,000

7. An investment was purchased for $734,500 nine yearsago. It had net lease payments of $56,000 per year for nine yearsand a resale of $850,000 (net of all costs). The discount rate is10.5%. What is the net present value (NPV)?

a) $0

b) -$72,240

c) $72,240

d) $115,500

8. If an investment has an overall capitalization rateof 10% and the mortgage terms were 20 years at 6% interest withmonthly payments, what is the equity capitalization rate? Themortgage is fully amortized, and the loan-to-value ratio is75%.

a) 0.0355

b) 0.0645

c) 0.0860

d) 0.1421

9. A property was purchased for $1,250,000. The NOI is$100,000. Both the NOI and value are expected to increase at acompound rate of 1% per year. What yield will be achieved if theproperty is held for 10 years?

a) 9%

b) 10%

c) 11%

d) 12%

10. What is the mortgage constant for a loan with a6.75% interest rate and a 20-year amortization period with monthlypayments?

a) 6.22%

b) 7.60%

c) 9.12%

d) 10.00%