FIN 590 Week 4 Midterm Exam

1. (TCO A) Real estate is an appropriate investment vehicle for

2. (TCO A) Demand for real estate, as a factor in the production of a final product, is

3. (TCO A) In traditional city patterns, the highest land use density is found in

4. (TCO A) Bid-rent curves

5. (TCO A,B,C) To forecast future benefits from a proposed venture, which of the following should be considered?

6. (TCO A,B,C) A shopping center's trade area is

7. (TCO A,B,C) A property's desirability, relative to competing properties, is influenced by all of the following except

8. (TCO A,B,C) In real estate investment analysis, capitalization rates

9. (TCO A,B,C) The difference between the rate of return on assets and the cost of borrowing is the

10. (TCO A,B,C) The debt coverage ratio is the relationship between

11. (TCO C, D) The instrument that evidences the borrower's indebtedness and promise to repay is called a

12. (TCO C, D) A second mortgage is an example of which of the following?

13. (TCO C, D) The size of the annual debt service depends upon

14. (TCO C, D) The annual debt service constant on a monthly payment, fully amortizing mortgage note is

15. (TCO C, D) The real rate of interest on a fixed-rate loan

16. (TCO C, D) Potential disadvantages of the limited partnership include

17. (TCO C, D) Which is a key difference between tenancy in common and joint tenancy?

18. (TCO D) The treatment of a gain under the installment sales method

19. (TCO D) In a 1031 Exchange (like-kind exchange),

20. (TCO D) The tax basis of property acquired in a like-kind exchange must be allocated between land and improvements

21. (TCO A, B, C) Bug Bastion Village, a student apartment complex, generates effective gross income of $26,000. Income tax savings are $12,500 (due to interest and depreciation expense, the owner's income tax liability for the year is $12,500 less than it would have been without the investment). There are no capital transactions, and all operating expenses were tax deductible. The after-tax cash flow to the equity investor was $13,800, and operating expenses equaled 90 percent of net operating income. What percent of net operating income is needed to cover the debt service obligation? Present the property's operating statement in good form.

22. (TCO C, D) An apartment house was purchased on July 8 of last year, by a taxpayer who computes her taxes on a calendar basis. Her depreciation deduction last year was $9,375. The building accounted for 75 percent of the property's market value at the time of purchase. What was the taxpayer's initial tax basis in the property?