Module 13 Quiz Flashcards
An investor’s down payment is a form of
A) debt investment.
B) deferred investment.
C) equity investment.
D) protected investment.
C) equity investment.
In the competition for real estate investment dollars, what is another way to break down the sources connected to the money market and the capital market?
A) debt and equity
B) dividends and interest
C) present and future
D) long term and short term
A) debt and equity
An investor purchasing mortgage-backed securities believes their investment has relative safety because their dollars are spread out over large pools of mortgages. What could undermine that safety for the
investor?
A) a population shift that moves property owners from detached houses to condominium units
B) increasing rate of inflation over a period of 3 years or more
C) a broad decline in real estate that impacts the entire
market rather than a particular sector
D) a decrease in interest rates causing more people to refinance
C) a broad decline in real estate that impacts the entire
market rather than a particular sector
The price of money in the money market is
A) the LIBOR rate.
B) the I bond index rate.
C) the interest rate.
D) the cost of living index.
C) the interest rate.
What actually happens when a particular parcel of real estate appreciates in value?
A) the market is in equilibrium
B) increasing interest rates and inflation create an appreciation of value
C) the value increase is due to excess demand over supply
D) the owner recaptures their cost of improvements to the property
C) the value increase is due to excess demand over supply
A real estate investor put $25,000 into a property and obtained a $100,000 mortgage. If the property increased in value over the next 12 months to $150,000, what is the investor’s return on equity during that period assuming the mortgage balance stayed about the same?
A) 20%
B) 200%
C) 100%
D) 50%
C) 100%
Note: $25,000 CHS PV 1n $50,000 FV and solve for i.
$25,000 [Enter] $50,000 [D%] works too
A mortgage is
A) a pledge of collateral for a real estate loan.
B) document that indicates the interest rate and terms of a loan.
C) pledge of collateral for a car loan.
D) document that makes a borrower promise to repay money
A) a pledge of collateral for a real estate loan.
The secondary mortgage market
A) is made up of investors like Fannie Mae and Freddie Mac who buy and sell mortgage loans.
B) is where second mortgages are bought and sold.
C) is in Chicago.
D) is where inferior credit (B paper) loans are bought and sold.
A) is made up of investors like Fannie Mae and Freddie Mac who buy and sell mortgage loans.
Which of the following best describes a balloon mortgage?
A) a loan amount that exceeds conventional lending limits
B) a loan that is fully amortized over 15 years rather than the traditional 30 years
C) a loan that requires a large upfront payment
D) a loan that is not fully amortized at maturity and requires a lumpsum payment
D) a loan that is not fully amortized at maturity and requires a lumpsum payment
The Federal Reserve Bank Board performs all the following functions, EXCEPT
A) using monetary policy to avoid inflation.
B) overseeing the Truth in Lending Act and monitoring Equal Credit Opportunity Act.
C) creating and implementing tax policy.
D) controlling money supply to avoid recessions.
C) creating and implementing tax policy.
Inflation and appreciation are terms that describe the same thing.
True
False
False
The U.S. Treasury is the entity that concerns itself with raising the money (from taxes) and making sure the bills get paid.
True
False
True
The interaction of buyers and sellers who trade short-term money instruments is referred to as a
A) money market.
B) financial market.
C) real estate market.
D) capital market.
A) money market.
Treasury bills are considered to be short-term
money instruments.
True
False
True
A bond is a form of debt investment.
True
False
True
The interaction of buyers and sellers is a direct measure of supply and demand.
True
False
True
Supply and demand is an important component of
A) equilibrium.
B) change.
C) anticipation.
D) competition
D) competition
Real estate markets are static and seldom change.
True
False
False
The interaction of buyers and sellers who trade short-term money instruments is referred to as a ______.
money market
Bonds, stocks, and mortgages are _____ instruments.
capital
A pledge of a described property interest as security for repayment of a loan is called a _____.
mortgage
An FHA loan is an example of a(n) ______mortgage
insured
The U.S. Treasury implements the ______ policy of the United States.
fiscal
The Federal Reserve carries out the nation’s
monetary policy.
True
False
True
The two sources of capital for real estate are
federal funds and the secondary mortgage market.
True
False
False
Risk plays a significant role in how investments
compete against each other
True
False
True
Who carries out the nation’s monetary policy?
The Federal Reserve
What are the four general duties of the Fed?
1) carry out the nation’s monetary policy
2) supervise and regulate banking institutions and protect the credit rights of consumers
3) maintain the stability of the financial system
4) provide certain financial services to the US government, the public, financial institutions, and foreign official institutions.
Who carries out the nation’s fiscal policy?
The US Treasury
What are the 3 primary markets?
1) Money
2) Capital
3) Real Estate
What are the 2 primary sources of capital?
1) Debt
2) Equity
Buyers and sellers of particular real estate and the transactions that occur among them is called ____.
the Real Estate Market
Note:
- The preferences of market participants are influenced by governmental and legal, economic, social, and environmental and geographical forces (the 4 forces that influence value).
- Real estate cycles can follow patterns of expansion, decline, recession, and recovery based on various economic factors. The position of the real estate
market is relative to its cycle and can be evidenced by activities and events such as increased foreclosures, vacancies, escalating prices, or rare practices
such as multiple bids offered on a property.
