Question 1

If an investment earns 12% annually:

Accepted Answer

A)  An equivalent monthly investment would have to earn a higher equivalent nominal rate to yield the same return 
B)  An equivalent monthly investment would have to earn a lower equivalent nominal rate to yield the same return 
C)  An equivalent monthly investment would have to earn the same equivalent nominal rate to yield the same return 
D)  A relation cannot be determined between a monthly and annual investment 
A)  An equivalent monthly investment would have to earn a higher equivalent nominal rate to yield the same return 
B)  An equivalent monthly investment would have to earn a lower equivalent nominal rate to yield the same return 
C)  An equivalent monthly investment would have to earn the same equivalent nominal rate to yield the same return 
D)  A relation cannot be determined between a monthly and annual investment B

Question 2

Your friend just won the lottery. He has a choice of receiving $50,000 a year for the next 20 years or a lump sum today. The lottery uses a 15% discount rate. What would be the lump sum your friend would receive?

Accepted Answer

A)  $312,967 
B)  $316,426 
C)  $500,000 
D)  $1,000,000 
A)  $312,967 
B)  $316,426 
C)  $500,000 
D)  $1,000,000 A

Question 3

The future value of $800 deposited today would be greater if that deposit earned 8% rather than 7.75%.

Accepted Answer

A) True 
 B)False  True

Question 4

Begin with a single sum of money at period 0. First, calculate a future value of that sum at 12.01%. Then discount that future value back to period 0 at 11.99%. In relation to the initial single sum, the discounted future value:

Accepted Answer

A)  Is greater than the original amount 
B)  Is less than the original amount 
C)  Is the same as the original amount 
D)  Cannot be determined with the information given 
A)  Is greater than the original amount 
B)  Is less than the original amount 
C)  Is the same as the original amount 
D)  Cannot be determined with the information given

Question 5

Assume that an investment, with an single initial cost of $1,000 and a yield of $50 monthly for 10 years, had a 7% IRR in the 60th month and a 7.2% IRR five months later. The IRR can be 6.8% in the 62nd month.

Accepted Answer

A) True 
 B)False

Question 6

Ten years ago, you put $150,000 into an interest-earning account. Today it is worth $275,000. What is the effective annual interest earned on the account?

Accepted Answer

A)  $225,000 
B)  6.00% 
C)  6.25% 
D)  8.33% 
E)  74.99% 
A)  $225,000 
B)  6.00% 
C)  6.25% 
D)  8.33% 
E)  74.99%

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

The future value compound factor given for period n) at 15%:

Accepted Answer

A)  Would be less than the factor for period n+1) at 15% 
B)  Would be greater than the factor given for period n+1) at 15% 
C)  Would be the same as the factor given for period n+1) at 15% 
D)  Bears no relationship to the factor for period n+1) at 15% 
A)  Would be less than the factor for period n+1) at 15% 
B)  Would be greater than the factor given for period n+1) at 15% 
C)  Would be the same as the factor given for period n+1) at 15% 
D)  Bears no relationship to the factor for period n+1) at 15%

Question 9

At 6%, the present value of a $1 payment in 12 months is .941905. At 7%, the present value of a $1 payment in 12 months is .950342.

Accepted Answer

A) True 
 B)False

Question 10

If you deposit $1,000 in an account that earns 5% per year, compounded annually, you will have $1,276 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly?

Accepted Answer

A)  $784 
B)  $1,000 
C)  $1,276 
D)  $1,283 
A)  $784 
B)  $1,000 
C)  $1,276 
D)  $1,283

Question 11

A deposit placed in an interest-earning account earning 8% a year will double in value in ___ years.

Accepted Answer

A)  6 
B)  8 
C)  9 
D)  72 
E)  It will never double in value 
A)  6 
B)  8 
C)  9 
D)  72 
E)  It will never double in value

Question 12

Which of the following is not a basic component of any compounding problem?

Accepted Answer

A)  An initial deposit 
B)  An interest rate 
C)  A period of time 
D)  A net present value 
A)  An initial deposit 
B)  An interest rate 
C)  A period of time 
D)  A net present value

Question 13

One way to calculate the present value of a single payment is with the following formula: PV = FV * 1+i)n.

Accepted Answer

A) True 
 B)False

Question 14

In order to solve a compounding problem, you must know all four of the variables in order to solve for the fifth variable.

Accepted Answer

A) True 
 B)False

Question 15

Present Value Factor for Reversion of $1
 $\begin{array}{cccccc}
\text { Perlod } & 6 \% & 7 \% & 8 \% & 9 \% & 10 \% \
\hline 1 & .943396 & .934579 & .925926 & .917431 & .909091 \
2 & .889996 & .873439 & .857339 & .841680 & .826446 \
3 & .839619 & .816298 & .793832 & .772183 & .751315 \
4 & .792094 & .762895 & .713503 & .708425 & .683013 \
5 & .747258 & .712986 & .680583 & .644931 & .620921 \
6 & .704961 & .666643 & .630170 & .596267 & .564474
\end{array}$
-Using only the information in the table above, what would the IRR be for an investment that cost $500 in period 0 and was sold for $750 in period 5?

Accepted Answer

A)  Between 6% and 7% 
B)  Between 7% and 8% 
C)  Between 8% and 9% 
D)  Between 9% and 10% 
A)  Between 6% and 7% 
B)  Between 7% and 8% 
C)  Between 8% and 9% 
D)  Between 9% and 10%

Question 16

If you saw a table containing the following factors, what kind of interest factor would you be looking at? $\begin{array}{ccc}
\text { End of Year } & & {6 \%} \
\hline 1 & & 1.06000 \
2 & & 1.12360 \
3 & & 1.1910 \
4 & & 1.2624 \
5 & & 133822
\end{array}$

Accepted Answer

A)  Present value of a single amount 
B)  Future value of a single amount 
C)  Present value of an annuity 
D)  Future value of an annuity 
A)  Present value of a single amount 
B)  Future value of a single amount 
C)  Present value of an annuity 
D)  Future value of an annuity

Question 17

An investment may have more than one internal rate of return.

Accepted Answer

A) True 
 B)False

Question 18

Your friend has a trust fund that will pay him $100,000 at the end of 10 years. Your friend, however, wants his money today. He promises to sign his trust fund over to you if you give him some money today. You require a 20% interest rate on money you lend to friends. How much would you be willing to lend under these terms?

Accepted Answer

A)  $16,151. 
B)  $50,000 
C)  $80,000 
D)  $0-it would be impossible to earn 20% interest on the loan. 
A)  $16,151. 
B)  $50,000 
C)  $80,000 
D)  $0-it would be impossible to earn 20% interest on the loan.

Question 19

You always see an ordinary annuity used in business and never see an annuity due used in business.

Accepted Answer

A) True 
 B)False

Question 20

At the end of 8 years, your friend wants to have $50,000 saved for a down payment on a house. He expects to earn 8%-compounded monthly-on his investments over the next 8 years. How much would your friend have to put in his investment account each month to reach his goal?

Accepted Answer

A)  $188 
B)  $374 
C)  $392 
D)  $521 
A)  $188 
B)  $374 
C)  $392 
D)  $521

Exam 3: Mortgage Loan Foundations: the Time Value of Money

If an investment earns 12% annually:

Your friend just won the lottery. He has a choice of receiving $50,000 a year for the next 20 years or a lump sum today. The lottery uses a 15% discount rate. What would be the lump sum your friend would receive?

The future value of $800 deposited today would be greater if that deposit earned 8% rather than 7.75%.

Begin with a single sum of money at period 0. First, calculate a future value of that sum at 12.01%. Then discount that future value back to period 0 at 11.99%. In relation to the initial single sum, the discounted future value:

Assume that an investment, with an single initial cost of $1,000 and a yield of $50 monthly for 10 years, had a 7% IRR in the 60th month and a 7.2% IRR five months later. The IRR can be 6.8% in the 62nd month.

Ten years ago, you put $150,000 into an interest-earning account. Today it is worth $275,000. What is the effective annual interest earned on the account?

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.

The future value compound factor given for period n) at 15%:

At 6%, the present value of a $1 payment in 12 months is .941905. At 7%, the present value of a $1 payment in 12 months is .950342.

If you deposit $1,000 in an account that earns 5% per year, compounded annually, you will have $1,276 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly?

A deposit placed in an interest-earning account earning 8% a year will double in value in ___ years.

Which of the following is not a basic component of any compounding problem?

One way to calculate the present value of a single payment is with the following formula: PV = FV * 1+i)n.

In order to solve a compounding problem, you must know all four of the variables in order to solve for the fifth variable.

If you saw a table containing the following factors, what kind of interest factor would you be looking at? End of Year 6\% 1 1.06000 2 1.12360 3 1.1910 4 1.2624 5 133822

An investment may have more than one internal rate of return.

You always see an ordinary annuity used in business and never see an annuity due used in business.

At the end of 8 years, your friend wants to have $50,000 saved for a down payment on a house. He expects to earn 8%-compounded monthly-on his investments over the next 8 years. How much would your friend have to put in his investment account each month to reach his goal?

Real Estate Investment: Basic Legal Concepts

Real Estate Financing: Notes and Mortgages

Fixed Interest Rate Mortgage Loans

Adjustable and Floating Rate Mortgage Loans

Mortgages: Additional Concepts, Analysis, and Applications

Single Family Housing: Pricing, Investment, and Tax Considerations

Underwriting and Financing Residential Properties

Income-Producing Properties: Leases, Rents, and the Market for Space

Valuation of Income Properties: Appraisal and the Market for Capital

Investment Analysis and Taxation of Income Properties

Financial Leverage and Financing Alternatives

Risk Analysis

Disposition and Renovation of Income Properties

Financing Corporate Real Estate

Financing Project Development

Financing Land Development Projects

Structuring Real Estate Investments: Organizational Forms and Joint Ventures

The Secondary Mortgage Market: Pass-Through Securities

The Secondary Mortgage Market: Cmos and Derivative Securities

Real Estate Investment Trusts Reits

Real Estate Investment Performance and Portfolio Considerations

Real Estate Investment Funds: Structure, Performance

Filters

One way to calculate the present value of a single payment is with the following formula: PV = FV * 1+i)ⁿ.