Fil 260 Exam 2

Front 1

The subject property's economic rent was estimated to be $600 per month. Recent sales of comparable rental property follow: What is the indicated market value?

Back 1

D. $78,084

Front 2

The annual net operating income of an apartment is $15,000. Using a net income multiplier of 10, what is the indicated market value?

Back 2

A. 150,000

Front 3

Using market approach, if subject property is $500 inferior to comparable due to location but $800 superior due to lot size, what is value of subject if comparable sold for $25,000?

Back 3

A. $25,300

Front 4

Characteristics of a fully amortized loan with a fixed rate is that:

I. The amount of loan balance slowly declines in early years and fast in later years

II. The dollar amount of monthly principal payments is declining over time as monthly mortgage payments are made

Back 4

A. Only I is true

Front 5

Which of the following statements are true?

I. in the gross income multiplier method, we divide the subject property's net operating income by the GIM estimated by using comparable properties

II. We divide NOI by a capitalization rate to obtain an estimated market value

Back 5

B. Only II is true

Front 6

The primary activity of the FNMA is

Back 6

D. purchasing loans from lenders in the primary mortgage market and selling mortgage backed securities in the secondary mortgage market

Front 7

The primary activity of GNMA

Back 7

A. to guarantee investors the timely payment of principal and interest on FHA insured and VA guaranteed loans.

Front 8

For ARM (adjusted rate mortgage) which of the following statements is true?

I. Lenders add margin to the ARM index to establish the ARM interest rate

II. Initial interest rates on ARM are higher than FM rates

Back 8

A. Only I is true

Front 9

Which of the following person is likely to choose ARM instead of FRM?

Back 9

D. The person who expects interest rates to decline over time

Front 10

Which of the following statements regarding depreciation is false?

Back 10

D. The 1986 Tax Reform Act does not allow us to use the straight-line method

Front 11

Bank A offers a home mortgage at 8% interest rate with 3 points. Bank B offers the same mortgage at 9% with 1 point. Which of the following statements is true?

I. Bank A is preferred for those who intend to hold the mortgage for a short-term period?

II. Bank A is preferred for those who intend to hold the mortgage for a long-time period?

Back 11

B. Only II is true

Front 12

Which of the following statements regarding Adjustable Rate Mortgage (ARM) is true?

I. An ARM is less risky than an FRM for lenders?

II. The payment cap limits on how much your mortgage interest rate can be adjusted

Back 12

A. I only

Front 13

Which of the following statements is true?

I. Debt coverage ratio (DCR) is a ratio of NOI over debt services lending institutions require DCR to be more than 1.0

II. A positive financial leverage indicates that use of borrowed money has a beneficial effect on equity dividend rate

Back 13

C. both I and II are true

Front 14

What was the primary reason for the depressed housing market in the early 1980's?

Back 14

D. Double -digit inflation and high interest rates

Front 15

Which of the following statements is true?

I. Mortgage refinancing should be considered if the current available market rates are higher than the contract rate that you may have now?

II. A borrower should pay refinancing costs, so how long a borrower plans to stay in his or her home is an important factor for mortgage refinancing decision

Back 15

B. Only II is true

Front 16

Which of the following statements concerning FHA loans is false?

Back 16

A. The FHA supplies FHA mortgage funds to the approved savings and loan associations

Front 17

Which of the following statements is true?

I. Underwriting as used in primary lending, is the evaluation or analysis of the risks involved with a loan. The ratio of monthly payment borrower income is often used as one criterion.

II. Loan warehousing is the borrowing of funds by a mortgage banker on a short

III. Loan closing its the collection of the monthly payments, payment of tazes

Back 17

Only I and II are true

Front 18

Which of the following statements concerning loan underwriting is false?

Back 18

C. The objective of loan underwriting is to sell loans very quickly in the secondary mortgage market before mortgage prices decline

Front 19

Which of the following statements regarding net present value is true?

I. A negative net present value indicated an acceptable investment

II. If the investment's IRR is greater than your cost of money or required rate of return, then accept the investment

Back 19

B. Only II is true

Front 20

For an ARM, which of the following statements is false?

Back 20

D. ARM is always a better choice than FRM because ARM offers a lower rate

Front 21

Which of the following statements is true?

I. If yields are higher for corporate bonds than they are mortgages of equivalent risk, money will flow out of the mortgage and into the bond market and into the bond market. the outflow of funds is called dis-intermediation

II. When genera; interest inflation rates are falling, motgge prices will go down, holding all other things constant

Back 21

A. Only I is true

Front 22

An owners equity on his or her house is expected to increase due to:

Back 22

A. Property value appreciation

B. Loan amortizaton

C. Both A and B

Front 23

Equity invested $20,000

Total present values of ATCF's ad ATER is $21,000 at 20%. Which of the following statements is true?

Back 23

A. It is an acceptable investment if your cost of money is lower than 20%

Front 24

Find Debt Service

(.08) (750,000) (0.1523)

Back 24

$91,380

Front 25

Find taxable income

Hint: taxable income=NOI-interest-depr.

140,000-90,000-23,636

Back 25

$26,364

Front 26

Find after tax cash flow (ATCF)

Hint: ATCH=BTCF-tax. BTCF=NOI-DS

140,000-91,380=48,620-7,382

Back 26

$41,238