#3 MULTIPLE CHOICE (no need to show work but please get right)

1. A property sold for $555,000. The buyer anticipated that the potential gross income (PGI) would be $93,000, the vacancy would be 5%, and expenses would be 35% of the effective gross income (EGI) in the year after purchase. What is the overall capitalization rate (RO)? Round your answer to the nearest 0.5%.

a) 9.5%

b) 10.0%

c) 10.5%

d) 11.0%

2. The subject property sold for $895,000. The appraiser estimated the PGI to be $154,000 and the vacancy and collection loss to be 5%. What is the potential gross income multiplier (PGIM)?

a) 0.1635

b) 0.1721

c) 5.8117

d) 6.1176

3. A property has a net income of $36,000 per year. The operating expense ratio (OER) is 36%. The vacancy and collection loss is estimated to be 4%. What is the EGI?

a) $12,960

b) $13,478

c) $56,250

d) $58,594

4. If a property has an OER of 42% and the net operating income (NOI) is $49,500, what is the EGI?

a) $20,790

b) $28,710

c) $85,345

d) $117,857

5. What is the market value of a property with an NOI of $33,000, vacancy and collection losses of $4,000, and operating expenses of $12,000 in a market where the PGIM is 9? Round your answer to the nearest $25,000.

a) $400,000

b) $425,000

c) $450,000

d) $500,000

6. A property recently sold for $444,000 (cash equivalent) and had $65,700 in potential gross income (PGI) for the following year. The expenses were 33% of the effective gross income (EGI). The vacancy and collection losses were estimated at 5%. What is the overall capitalization rate (RO)?

a) 9.42%

b) 9.91%

c) 14.06%

d) 14.93%

7. The subject is located in a market where lenders are making commercial loans on properties like the subject at 8.5% per year with monthly payments and a 20-year amortization with a 75% loan-to- value ratio. The equity dividend rate (RE) in this market is 10%. What is the overall capitalization rate?

a) 8.50%

b) 8.88%

c) 10.00%

d) 10.31%

8. If the overall capitalization rate is 9.5%, the mortgage constant is 7.755%, and the loan-to-value ratio is 80%, what is the equity dividend rate (RE)?

a) 7.76%

b) 8.10%

c) 9.50%

d) 16.48%

9. If the loan-to-value ratio is 75%, the mortgage capitalization rate (RM) is 10.55%, and the debt coverage ratio (DCR) is 1.25, what is the implied capitalization rate based on the debt coverage formula (underwriters method)?

a) 7.91%

b) 8.44%

c) 9.90%

d) 10.55%

10. If an investment has an overall capitalization rate of 10% and the mortgage terms were 20 years at 6% interest with monthly payments, what is the equity capitalization rate? The mortgage is fully amortized, and the loan-to-value ratio is 75%.

a) 0.0355

b) 0.0645

c) 0.0860

d) 0.1421