Course Introduction
Urban Economics
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Urban Economics explores the economic forces that shape cities and urban areas, examining topics such as the location decisions of households and firms, urban land use patterns, housing markets, transportation systems, and the causes and consequences of urban problems like congestion, poverty, and segregation. The course integrates economic theory with empirical analysis to understand how policies and market mechanisms influence the development and functioning of cities, providing students with the analytical tools to address contemporary urban challenges.
Recommended Textbook
Real Estate Finance Theory and Practice 6th Edition by Terrence M. Clauretie
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473 Verified Questions
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2
Chapter 1: Finance and Real Estate
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Sample Questions
Q1) Capital markets:
A) deal in long-term securities
B) deal in short-term Treasury bills and long-term Treasury bonds to finance their deficits
C) rarely are involved in real estate transactions
D) consider mortgages only for short-term,interim financing
Answer: A
Q2) For the economy the concept that the amount of savings equals the total amount that is invested is referred to as:
A) the debt-equity ratio
B) not important to potential creditors because there are better methods of measuring credit worthiness
C) the savings-investment cycle
D) cash flow
Answer: C
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3
Chapter 2: Money Credit and the Determination of Interest
Rates
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Sample Questions
Q1) Other things being equal,the greater the rate of growth of money:
A) the better off we are
B) the greater the rate of inflation
C) the higher the standard of living for the general population
D) the higher the poverty level
Answer: B
Q2) The following security is generally considered to have no default risk:
A) EBM corporation
B) Orange County,California
C) U.S. Treasury securities
D) State of New York general revenue bonds
Answer: C
Q3) Non-callable bonds:
A) have a callability risk attached to them
B) are less desirable than callable bonds
C) can be called prior to maturity if holders are given a 120-day notice
D) will have a lower yield than identical callable bonds
Answer: D
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Chapter 3: Finance Theory and Real Estate
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Sample Questions
Q1) Options have intrinsic and market values:
A) market value is generally less than intrinsic value
B) intrinsic value is excess of the current price over the strike price for a call
C) intrinsic value is excess of the current price over the strike price for a put
D) market values and intrinsic values are the same
Answer: B
Q2) Interest rate risk for thrifts occurs partially because they:
A) issue short-term deposits
B) issue long-term notes
C) invest in long-term variable rate mortgages
D) invest in short-term mortgages
Answer: A
Q3) Pass-through Mortgage Backed Securities (MBSs)provide the investor with:
A) less prepayment risk as the originator of a specific mortgage
B) a prorated share of all monthly principal and interest payments
C) no risk from prepayments of loans
D) a weighted average of the monthly principal but not interest payments
Answer: B
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5
Chapter 4: The Early History of Residential Finance and
Creation of the Fixed Rate Mortgage
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Sample Questions
Q1) The effective interest charge on a loan will be effected by:
A) the APR
B) discount points
C) appraisal costs
D) none of the above
Q2) Lenders are offering different financing options on 30-year FRMs.One lender offers a contract rate of 6% with one discount point while another lender offers a 6% contract rate with two discount points.Since both loans are discounted,which is the better option for the borrower based on the APR? Other factors are held constant and the borrower wants to minimize his/her borrowing cost.
A) 6% with one point
B) 6% with two points
C) can't determine without the loan amount
D) discounting doesn't matter,the APRs will be the same since the contract rates are the same
Q3) The Federal National Mortgage Association was formed in part to:
A) buy and sell VA mortgages
B) buy and sell FHA mortgages
C) buy and sell conventional mortgages
D) none of the above
Page 6
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Chapter 5: Modern Residential Finance
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Sample Questions
Q1) Assumable loans and carry backs:
A) have totally replaced FHA and VA financing
B) are examples of what is termed creative financing
C) are short-term loans with balloon payments
D) are two forms of FHA financing
Q2) A maturity mismatch occurs when:
A) over one half of all mortgage debt is held by depository institutions
B) mortgage loan interest rates are high
C) a financial institution has originated more conventional loans than government insured loans
D) there is a large difference in the maturity of a financial institutions assets and liabilities
Q3) Disintermediation refers to:
A) the withdrawal of funds from financial institutions by depositors in excess of deposits
B) financial institutions withdrawing from the Federal Reserve System
C) financial institutions shifting from FHA loans to conventional loans
D) none of the above
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Chapter 6: Alternative Mortgage Instruments
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Sample Questions
Q1) Suppose you have a 30-year ARM with an original loan balance of $125,000,monthly payment in year one of $874.02 and monthly payment in year two of $1003.36,and a contract rate in year two of 9%.If the loan is repaid at the end of year two,what amount of discount points should the lender have charged to earn an effective yield of 10.17%?
A) 2.85 points
B) 3.51 points
C) 3.75 points
D) 8.22 points
E) 9.18 points
Q2) A PLAM has the following terms: loan amount: $118,000,real interest rate: 5.50%, 30-year term,2.50 discount points,annual payment adjustments,monthly payments.The payment in year one is $669.99 and the payment in year two is $649.89.What is the inflation rate at the end of year two?
A) -3%
B) 4%
C) 0%
D) 5.50%
E) cannot be determined from the information given
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Page 8
Chapter 7: Financing and Property Values
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Sample Questions
Q1) The term "carryback financing" refers to:
A) a motivated seller who takes back a note at a low rate in order to sell the property
B) a situation where the lender takes the property back after a default on the loan
C) an assumable loan in which a lender waives the discount points in order to complete the loan transaction
D) an assumable FHA loan
Q2) Mortgage Revenue Bonds,a class of bonds called municipals,are issued by state and local governments and:
A) allow the government to purchase property for government use
B) provide an interest rate at a higher rate than corporate bonds
C) provide interest that is free of federal taxation
D) provide interest that is free from capital gains taxation
Q3) The term "cash equivalent" value refers to:
A) the value of a residential property while it is listed
B) the amount of discount points charged by a lender
C) the value of a property if sold for all cash
D) the cash equivalency of the mortgage on a property
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9
Chapter 8: Federal Housing Policies: Part 1
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Sample Questions
Q1) Mortgage insurance is designed to:
A) provide for continued payment of the loan installments to the lender in case the borrower becomes temporarily unable to do so
B) protect the borrower in case the lender or seller has provided inaccurate or fraudulent claims that contributed to the borrower's agreement to purchase the property
C) protect the lender from the dual events that the borrower defaults and the value of the residence is less than the loan balance at the time of default
D) protect the lender if,for any reason,the borrower defaults
Q2) Under the current tax law,what would the annual cost of housing be for a person with a house valued at $150,000,a mortgage rate of 11 percent,property taxes of 3 percent,miscellaneous expenses and depreciation of 1 percent,and housing inflation of 7 percent.The person is in the 30 percent tax bracket.
A) $4,700
B) $4,200
C) $6,100
D) $5,700
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Chapter 9: Federal Housing Policies: Part 2
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Sample Questions
Q1) One method of defining or identifying discriminating lending behavior is that discrimination is said to exist if a lender purposely intends to treat a minority group member less favorably.This is known as the:
A) effects method
B) intent method
C) practices method
D) screening method
Q2) One method of defining or identifying discriminating lending behavior is that discrimination is said to exist if a lender fails to adhere to a set of guidelines governing the do's and don'ts of a lending procedure.This is known as the:
A) effects method
B) intent method
C) practices method
D) screening method
Q3) Which of the following statements is incorrect in relation to the ECOA?
A) non-discriminatory firms will attain a competitive advantage
B) lenders are engaged in little discrimination
C) the ECOA has had a significant impact on making credit available
D) the ECOA is a valuable statement about principles of fair lending practices
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Chapter 10: The Secondary Mortgage Market
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Sample Questions
Q1) Investors are attracted to pass-through bonds because of all of the following except:
A) high yield
B) timing of the cash flows
C) liquidity
D) risk-free quality
Q2) The first popular MRSs were:
A) mortgage pay-through bonds
B) mortgage-backed bonds
C) collateralized mortgage obligations
D) mortgage pass-through bonds
Q3) 10-18.The investor is said to have an undivided interest in the pool of mortgages or ownership in the mortgages in the following type of mortgage-related security:
A) mortgage pay-through bonds
B) mortgage-backed bonds
C) mortgage passthrough securities d . collateralized mortgage obligations
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Chapter 11: Valuation of Mortgage Securities
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Sample Questions
Q1) 11-21.A security for which the cash flows derived from mortgages are rearranged in terms of amount and timing is a:
A) mortgage-related security
B) collateralized mortgage obligation
C) mortgage-derivative security
D) pass-through security
E) all of the above
Q2) 11-11.For traditional debt securities which of the following is false?
A) cash flows are fixed in terms of amount and payment date
B) for treasury bonds or (non-callable)corporate debt,an increase in the market rate of interest will lower their value
C) the longer the duration (similar to maturity)of the obligation,the less the changes in value as a result of a change in market rates
D) mortgage securities are very dissimilar to traditional types of debt
Q3) 11-17.The current industry standard for the model of expected prepayments is:
A) the twelve-year prepaid life model
B) the constant prepayment rate model
C) the public securities association model
D) the econometric prepayment model
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Page 13
Chapter 12: Controlling Default Risk Through Borrower
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Sample Questions
Q1) 12-11.According to Jackson and Kaserman:
A) the ability-to-pay theory of default is superior
B) the equity theory of default is superior
C) both theories are equally valid
D) neither theory could be demonstrated empirically
Q2) 12-33.Which type of note limits the lender's remedy to the value of the residence that serves as collateral?
A) non-recourse note
B) recourse note
C) obligatory note
D) none of the above
Q3) A lengthy foreclosure process can lead a loss as a percent of the balance of:
A) 1% to 3%
B) 4% to 7%
C) 40% to 50%
D) over 100%
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Chapter 13: Loan Origination, Processing, and Closing
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Sample Questions
Q1) 13-34.A deed conveys:
A) title of the property from the seller to the buyer
B) identification of the buyer and the seller
C) both of the above
D) none of the above
Q2) 13-17.Recording is necessary to protect the owner against others who may claim to have:
A) a valid deed
B) a senior lien against the property
C) claims in regards to transferring of the property
D) both a and b e both a and c
Q3) 13-27.The approach based on the idea that a buyer will not pay more for a property than the amount it would take to build it from scratch is:
A) the income approach
B) the cost approach
C) the market approach
D) the scratch approach
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Chapter
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Sample Questions
Q1) The FHA up-front mortgage insurance premium (MIP)is:
A) refunded if the loan is subsequently assumed
B) equal to five percent of the face amount of the loan
C) can be financed under some conditions
D) none of the above
Q2) A deficiency judgment is:
A) a judgment that allows the mortgagor to redeem the property prior to foreclosure
B) a judgment against the borrower for the difference between the amount owed to a lender and the value of the property sold at a foreclosure sale
C) a judgment that allows the mortgage insurer to pursue the lender for losses in a foreclosure
D) none of the above
Q3) FHA mortgage insurance:
A) protects the borrower against all losses due to default
B) protects the lender against all losses due to fraud
C) protects the lender and borrower from all losses due to foreclosure
D) none of the above
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Page 16
Chapter 15: Value, Leverage, and Capital Structure
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Sample Questions
Q1) Financial leverage is:
A) the left side of the balance sheet
B) the use of debt to finance real estate
C) the use of equity to finance real estate
D) a and b
E) b and c
Q2) Depreciation is defined as a _______________ but not a cash outlay.
A) cash expense
B) tax deductible expense
C) production cost
D) part of your cash flow
E) none of the above
Q3) Positive leverage is defined as the use of debt at a cost ________________ than the return on the asset which __________________ the return on equity.
A) decreases,increases
B) less,increases
C) increases,decreases d more,decreases
E equal,increases
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17
Chapter 16: Federal Taxation and Real Estate Finance
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Sample Questions
Q1) 16-13.Passive loss limitation rules allow active participants in a real estate investment to offset up to _________________ of income from other classes:
A) $15,000
B) $25,000
C) $30,000
D) $50,000
E) none of the above
Q2) A test that determines if the original issue discount (OID)rules apply is the:
A) time value of money test
B) adequacy of interest test
C) risk-return test
D) a and b
E) b and c
Q3) Alternative Minimum Tax rules were established in:
A) 1978
B) 1986
C) 1991
D) 1993
E) none of the above
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Page 18
Chapter 17: Sources of Funds for Commercial Real Estate
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Sample Questions
Q1) The primary institutional investors in equity real estate are:
A) pension funds
B) federal credit agencies
C) unions
D) none of the above
Q2) Thrifts specialize in:
A) residential loans
B) multi-family properties
C) commercial properties
D) none of the above
Q3) Insurance companies invest primarily in:
A) CMOs
B) commercial mortgages
C) residential mortgages
D) none of the above
Q4) The largest supplier of commercial real estate debt is:
A) state and local retirement funds
B) commercial banks
C) thrifts
D) pension funds
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Chapter 18: Acquisition, Development, and Construction Financing
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Sample Questions
Q1) Warehousing refers to:
A) tying up as much equity as possible in large parcels of land
B) tying up as much equity as possible in small parcels of land
C) tying up as little equity as possible in large parcels of land
D) tying up as little equity as possible in small parcels of land
Q2) 18-33.A developer that constructs and donates a public park is most likely:
A) palm greasing
B) paying "dollar based" impact fees
C) looking for a density bonus
D) none of the above
Q3) 18-11.Development includes:
A) subdividing
B) engineering
C) physical work
D) all of the above
Q4) 18-37.Raw land is acquired by two types of investors:
A) developer/warehouser
B) developer/speculator
C) speculator/warehouser
D) speculator/lender
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Chapter 19: Permanent Financing of Commercial Real
Estate Properties
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Sample Questions
Q1) 19-13.In an equity participation loan the lender offers a lower rate on the loan in exchange for:
A) a share of the cash flows from operations
B) a share of appreciation in the property
C) either a or b or both
D) title to the property
Q2) The seller-lessee cannot account for the transaction as a sale of the property if:
A) the seller-lessee provides non-recourse financing for all or a portion of the sales price
B) the seller-lessee is not relieved of any existing debt on the property that may be assumed by the buyer-lessor
C) the seller-lessee is required to compensate the buyer-lessor for a decline in the fair market value of the property at the end of the lease term
D) all of the above
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21
Chapter 20: Ownership Structures for Financing and Holding Real Estate
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Sample Questions
Q1) 20-33.The following is NOT a test that an entity is a corporation and not a partnership:
A) absence of a termination date
B) centralized management
C) limited liability
D) amount of value of assets
Q2) 20-16.An IRS code criteria for a REIT to qualify as a tax-free entity is:
A) it can not issue transferable shares
B) it may be a financial institution or insurance company
C) it must derive at least 75% of its gross income from real estate related investments
D) it may not hold all of its assets in the form of mortgages
Q3) 20-26.One advantage of sole ownership of real estate properties is:
A) no double taxation
B) property owners are not personally liable for debts in excess of $25,000
C) large portfolios of properties can be easily acquired
D) none of the above
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Chapter 21: Real Estate in a Portfolio Context
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Sample Questions
Q1) 21-15.The "smoothing" of real estate asset returns estimated from appraised values refers to:
A) appraised property values do not fluctuate as much as transaction values
B) appraised values is based only on previously appraised values
C) appraised values are never made with reference to transaction values on comparables
D) none of the above
Q2) 21-16.The major risks associated with investment in real estate include:
A) marketability risk
B) information risk
C) residual risk
D) none of the above
E) all of above
Q3) At a point where the return on asset A and the return on asset B are both above their average,the numerator in the coefficient of determination will be:
A) negative
B) positive
C) can be either negative or positive
D) indeterminate
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Page 23
Chapter 22: Liability, Agency Problems, Fraud, and Ethics in Real Estate Finance
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Q1) The fiduciary relationship which results from the manifestation of consent by one person to another such that the other shall act on behalf and subject to his control,and consent by the other so to act,is referred to as:
A) statute of frauds
B) agency
C) lender control
D) parole evidence rule
Q2) One who intentionally causes injury to another is subject to liability to the other for that injury,if this conduct is generally culpable and not justifiable under the circumstances.This is referred to as:
A) prima facia tort
B) breach of contract
C) fraud
D) strict liability
Q3) Making of a promise with no intention of fulfilling it is referred to as:
A) nondisclosure fraud
B) promissory fraud
C) tort
D) fiduciary
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