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Chapter 1
1. The most probable price which a property will bring in
a competitive and open market under all conditions
requisite to a fair sale is:
a.
b.
c.
d.
transaction price.
most probable selling price.
market value.
investment value.
2. Investment value:
a.
b.
c.
d.
is an objective estimate of a property’s worth as
an investment.
is the value of the property as an investment,
and therefore is also the most probable selling
price.
from the present owner’s perspective sets the
upper end of the range of possible transaction
prices.
is unique to the individual investor and need not
be closely related to market value or most
probable selling price.
3. The term market value, as generally employed by
appraisers, means:
a.
b.
c.
d.
the most probable price a property will bring in a
competitive and open market under all
conditions requisite to a fair sale.
the most probable price that will result from
arm’s-length bargaining between an equally
informed buyer and seller.
the highest price in terms of money that a
property will bring if exposed to the market for a
reasonable length of time.
the price a prudent buyer would pay if fully
informed of all relevant facts regarding the
property.
6. When considering a real estate investment
opportunity, which of the following issues need to be
addressed?
a.
b.
c.
d.
7. Cash flows for real estate investments may come
from:
a.
b.
c.
d.
b.
c.
d.
investment value will always exceed most
probable selling price, at least by the amount of
the transaction costs.
most probable selling price will always exceed
investment value, at least by the amount of
transaction costs.
investment value may be greater or less than
most probable selling price, and the difference
will approximate transaction costs.
investment value need not be closely related to
most probable selling price.
5. Which of the following is a real estate investment
decision?
a.
b.
c.
d.
Purchase of a $50,000 interest in a partnership
which develops office buildings
Purchase of a six-flat apartment building
A new reservoir built by the U.S. Government
All of the above
rental.
refinancing.
tax savings.
all of the above.
8. Rational real estate investment decisions require:
a.
b.
c.
d.
a coupling of estimated costs and benefits with a
forecast of the timing of disbursements and
receipts.
choosing between uncertain costs and certain
present benefits.
a methodology for ranking attainable
combinations by their variety.
computer expertise.
9. Active investors (as opposed to passive investors):
a.
b.
c.
d.
invest primarily in debt instruments.
invest primarily in equities.
are more interested in primary than secondary
markets.
make decisions that affect the profitability of the
property’s operations.
10. Equity investors:
a.
b.
4. The relationship between investment value and most
probable selling price is:
a.
Estimates of total costs and benefits
The style of the architecture of the building
The timing of disbursements and receipts
(a) and (c) above
c.
d.
are always active in the sense that they make
decisions which affect the profitability of the
property’s operations.
are always passive in the sense that they make
no decisions which affect the profitability of the
property’s operations.
always take an ownership interest in debt
instruments.
may be either active or passive investors.
11. State-of-the-art real estate investment analysis treats
real estate as:
a.
b.
c.
d.
a capital asset desired for the stream of benefits
it creates.
a probabilistic time value of realty problem.
a case of modern working capital management.
appropriate only for a short range of investment
goals.
12. Real estate investors:
18. A rational risk taker:
a.
a.
b.
c.
d.
b.
c.
d.
may be active or passive investors, depending
upon whether they take an equity or a debt
position.
always depend upon income tax benefits to
make the investment successful.
are required to exercise stand-by loan
commitments.
either directly or indirectly, purchase rights to a
stream of future cash flows.
Chapter 4
1. Which of the following is descriptive of data gathering
by communication?
13. Real estate is an appropriate investment vehicle:
a.
a.
b.
b.
c.
d.
for individuals, but not for institutions such as
pension funds and life insurance companies.
for institutions such as pension funds and life
insurance companies, but not for individuals.
for individuals and institutions, depending upon
their time horizons and investment goals.
for investors in debt instruments but not for
investors in equity instruments.
14. Foreign investors:
a.
b.
c.
d.
own more than 20 percent of U.S. real estate,
but their holdings are widely disbursed across
the United States.
own a small portion (less than 5 percent) of U.S.
real estate.
have only recently (within the last decade)
become interested in U.S. real estate.
are not permitted to own U.S. real estate.
15. The investment decision process:
a.
b.
c.
d.
is fundamentally the same for real estate
investment analysis as for other investment
areas.
requires the investor to adjust expected cash
flows for timing differences and risk.
recognizes that investment assets are desired
only for the benefits of ownership they bestow.
all of the above are true.
16. The probabilistic estimate of the price at which a
property will be sold is its:
a.
b.
c.
d.
investment value.
transaction price.
most probable selling price.
market value.
17. For a particular investment property, investment
value:
a.
b.
c.
d.
is determined by the selling price agreed upon
by the buyer and seller.
is the value placed on the property by a qualified
appraiser.
is the highest price a prospective buyer is
justified in paying for the property.
(a) and(c) above.
specifies investment objectives carefully.
makes investment decisions based on "tips".
eliminates as much risk as possible.
(a) and(c) above.
c.
d.
It is more time-consuming than data gathering
by observation.
It is more objective than data gathering by
observation.
It is a more versatile means of data gathering.
All of the above.
2. Market information can help serve which of the
following functions?
a.
b.
c.
d.
Assist in developing reasonable cash flow
projections
Aid in purchase, divestiture, and refinancing
decisions
Facilitate operating decisions
All of the above
3. The point of maximum net benefit derived from market
research:
a.
b.
c.
d.
is easily calculated by charting costs on the xaxis and benefit on the y -axis.
is easily calculated by charting benefits on the xaxis and costs on the y-axis.
is objectively measured.
is not objectively measurable.
4. Which of the following is a step of the research
process?
a.
b.
c.
d.
Define the problem.
Design the research strategy.
Data interpretation
All of the above
5. Which of the following is an example of primary data?
a.
b.
c.
d.
Information taken from the Census of Population
Data bought from university research studies
Telephone interviews
None of the above
6. Operating management uses research data for
planning, problem solving and control purposes. Which
one of the following is most likely to be used for control
purposes?
a.
b.
c.
d.
Data on basic trends in the economic
environment
Data on standard amenity packages included in
competitive buildings
Data on typical tenant mix in competitive
commercial rental projects
Tracking operating expense ratios for buildings
in one’s portfolio
7. Which of the following aspects of research process is
least affected by the nature of available data?
a.
b.
c.
d.
The definition of the research problem
The nature of the research design
The design of the data collection program
Data analysis and interpretation
8. Longitudinal studies:
a.
b.
c.
d.
involve one-time sampling from a population of
research interest.
measure changes over time.
are the most frequent type of data-collection
assignment.
provide a single snapshot of the variables under
observation.
9. Inferential statistics:
a.
b.
c.
d.
involve measuring characteristics that are
important to a problem and bringing them
together in summary form.
are useful primarily because they permit the
reduction of large masses of data to essentials.
involve drawing conclusions from evidence
contained in the data.
employ quantitative expressions to describe
characteristics of a sample of an underlying
population.
10. The need for real estate market research exists
because:
a.
b.
c.
d.
real estate markets are relatively efficient.
all relevant information are quickly reflected in
market prices.
firms view their marginal revenue curves as
horizontal.
data for rational decision making are often not
readily available.
11. Research and data collection for investment decision
making reaches its maximum level of cost effectiveness:
a.
b.
c.
d.
when the incremental value of data collected
substantially exceeds the cost of collection.
when the incremental value of data collected is
substantially less than the cost of collection.
when the incremental value of data collected
exactly equals the cost of collection.
when no more data can be collected.
12. Geographic Information Systems are particularly
well-suited for displaying:
a.
b.
c.
d.
spatially related data.
time-series data.
financial data.
all the above.
Chapter 5
1. Which of the following is not an example of operating
expenses?
a.
b.
c.
d.
Property taxes
Maintenance fees
Income taxes
All of the above are examples of operating
expenses
2. A property has a potential gross rent of $1,500,000;
operating expenses of $765,750; a vacancy allowance of
$45,000, and other income of $9,000. What is its
effective gross income?
a.
b.
c.
d.
$1,455,000
$1,464,000
$698,250
None of the above
3. To forecast future benefits from a proposed venture,
which of the following should be considered?
a.
b.
c.
d.
The property’s immediate past operating history
Anticipated changes in the social and political
environment
The likely change in a property’s market value
over the holding period
All of the above
4. The amount of revenue a property would generate if
fully occupied at market rents, and with no uncollectible
rent, is its:
a.
b.
c.
d.
effective gross income.
potential gross income.
net operating income.
before-tax cash flow.
5. When searching for properties to use as a sample of
comparables, factors which tend to limit the universe
include:
a.
b.
c.
d.
amenities offered by competing properties.
the functional efficiency of other properties.
the location of the properties.
all the above.
6. Activity at one location generates movement of people
and things, the expense of which is called:
a.
b.
c.
d.
transfer costs.
hard costs.
linkages.
soft costs.
7. Loss of functional efficiency due to defective or dated
design is called:
a.
b.
c.
d.
physical deterioration.
economic obsolescence.
functional obsolescence.
functional deterioration.
8. The measure of how well a property is designed to do
the job it is intended to perform is called:
3. The decline in a building’s competitive position due to
defective or dated design is called:
a.
b.
c.
d.
a.
b.
c.
d.
physical durability.
economic efficiency.
fabrication quality.
functional efficiency.
functional obsolescence.
functional disutility.
physical obsolescence.
physical disutility.
9. Which one of the following is not considered an
operating expense?
4. A property’s desirability relative to competing
properties is influenced by all of the following except:
a.
b.
c.
d.
a.
b.
c.
d.
Property management fees
Depreciation
Janitorial wages
Insurance premiums
10. The revenue a property is expected to generate after
adjusting for operating expenses but before providing for
debt service or income tax consequences is:
a.
b.
c.
d.
net operating income.
effective gross income.
normalized gross income.
before-tax cash flow.
11. A property’s market area is:
a.
b.
c.
d.
the geographic area from which tenants will be
drawn.
a precisely definable area in terms of
boundaries.
determined by subdivision controls and zoning
regulations.
the area within which functional obsolescence is
operative.
12. A shopping center’s trade area is:
a.
b.
c.
d.
the area within which travel time to the center
does not exceed approximately fifteen minutes.
determined by physical barriers to the flow of
customer traffic.
the approximate geographical area from within
which tenants will be drawn.
the geographic area from within which the major
portion of patronage is drawn.
Chapter 6
1. A property’s income-generating potential depends on:
a.
b.
c.
d.
the interaction of supply and demand in its
market area.
its desirability relative to competing properties in
the market area.
both (a) and (b).
none of the above are true.
2. The appropriateness of a facility’s design or
engineering for its intended use is a measure of its:
a.
b.
c.
d.
functional efficiency.
functional obsolescence.
utility.
productivity.
neighborhood economic and social conditions.
relative physical durability.
relative functional efficiency.
the owner’s income tax bracket.
5. All of the following are locational characteristics
except:
a.
b.
c.
d.
neighborhood influences.
functional obsolescence.
externalities.
subdivision controls.
6. Capitalization rates:
a.
b.
c.
d.
are a measure of the relationship between a
property’s market value and net operating
income.
are used primarily as an income forecasting tool.
are a measure of the relationship between a
property’s market value and gross rental
income.
none of the above are true.
7. Revenue forecasting is:
a.
b.
c.
d.
essentially a marketing forecasting problem.
irrelevant to the real estate investment decision.
an example of why Geographic Information
Systems are no longer useful.
too costly to be pursued.
8. Neighborhood influences:
a.
b.
c.
d.
are environmental factors that influence site
value.
affect the degree of functional efficiency.
are influenced by the degree of functional
obsolescence.
are more commonly referred to as restrictive
covenants.