Section 1 Practice Test (Parts 1-3)

Question 1

What is the purpose of an appraisal assignment define?
a. A summary of the scope of work decision
b. The definition of the client’s problem
c. The intended use of the assignment
d. The type and definition of value used in the assignment

Answer 1

d. The type and definition of value used in the assignment.

Question 2

A value opinion of a proposed office building based on a current effective date would generally require what kind of assignment condition?
a. a hypothetical condition
b. an extended limiting condition
c. an extraordinary assumption/special assumption
d. a standard assumption

Answer 2

a. a hypothetical condition

Question 3

The ratio of annual debt service to the principal amount of the mortgage loan is called the
a. Discount rate.
b. Equity capitalization rate.
c. Interest rate.
d. Mortgage capitalization rate.

Answer 3

d. Mortgage capitalization rate.

Question 4

If the net operating income of a property is $187,500 And the market indicates an overall capitalization rate of 7.5%, what is the indicated value using direct capitalization?
a. $201,563
b. $328,125
c. $2,500,000
d. $2,678,571

Answer 4

c. $2,500,000

Question 5

What are the three traditional approaches to value?
a. Cost, sales comparison, and income capitalization
b. Income capitalization, sales comparison, and extraction
c. Market analysis, highest and best use analysis, and cost analysis
d. Sales comparison, extraction, and allocation

Answer 5

a. Cost, sales comparison, and income capitalization

Question 6

What is the indicated overall capitalization rate of a property that sold for $825,000 and has a net operating income of $53,625?
a. 0.063%
b. 0.15%
c. 6.5%
d. 15.38%

Answer 6

c. 6.5%

Question 7

What is the gross rent multiplier of a property that sold for $174,000 and has a gross monthly rent of $1,500?
a. 8.6%
b. 98
c. 113
d. 116

Answer 7

d. 116

Question 8

The amount left after debt service has been deducted from net operating income is called
a. After-tax cash flow.
b. Discounted cash flow.
c. Pre-tax cash flow.
d. Reversion.

Answer 8

c. Pre-tax cash flow.

Question 9

What method is used to convert an estimate of a single year’s income expectancy into an indication of value?
a. Direct capitalization
b. Discounted cash flow analysis
c. Reversion
d. Yield capitalization

Answer 9

a. Direct capitalization

Question 10

Jackson is appraising a large tract of land that is being farmed for agricultural use. The land use surrounding the farm is currently in transition from agricultural to one-unit residential developments. For this assignment, what 2 procedures should Jackson consider in analyzing the land value of the property?
a. Extraction and allocation
b. Ground rent capitalization and allocation
c. Residual land technique and extraction
d. Sales comparison and subdivision development analysis

Answer 10

d. Sales comparison and subdivision development analysis