General Appraiser Income Approach

When an appraiser determines the cash flow after debt service but before income and capital gains taxes, it is referred to as the:

Equity dividend

The delta symbol means

change

The debt coverage ratio measures a property's ability to meet its debt service requirements out of

Net operating income

The technique which derives a capitalization rate through combining the rates attributable to a capital investment (mortgage and equity) is:

Band of investment

A fundamental difference between direct capitalization and yield capitalization is:

Direct deals with current year's income and yield with future benefits

Agents of production include Land, Labor, Capital, and

Coordination

Pre-tax cash flow, which is the cash flow of a property after expenses and debt service have been paid, but before income and capital gains taxes, is another name for:

Equity dividend

An appraiser wants to determine the present value of future income streams. This process is referred to as:

Discounting

An appraiser who is adjusting sales prices of properties with atypical financing is performing ________________ analysis.

Cash Equivalency

Agents of production include Land, Labor, Capital, and

Coordination

The concept that the value of a superior property is adversely affected by its association with an inferior property of the same type is:

Regression

The concept that the value of an inferior property is enhanced by its association with better properties of the same type is known as:

Progression

The concept that the value of a particular component is measured as the amount that its absence would detract from the value of the whole is known as:

Contribution

Prior to listing his property for sale, the owner spent $35,000 remodeling the bathroom. The market will only bear $20,000 of this expenditure. Which economic principle does this demonstrate?

Law of decreasing returns

In economic theory, supply and demand always move proportionally with each other.

False

Which principle is defined as: The result of the cause-and-effect relationship among the forces that influence real property value?

Change

An appraiser wants to determine the present value of future income streams. This process is referred to as:

Discounting

You are working with your HP12C. Suddenly you notice a flashing (*) on the register. What does that mean?

The battery needs to be replaced

Your HP 12c is set to two decimal places. You want to change it to 4 decimal places. What keystrokes would you use?

Gold [ f ], 4

USPAP identifies standards for determining the acceptability of the appraiser's Scope of Work decision. They are:

Both A and B

An appraiser who is adjusting sales prices of properties with atypical financing is performing ____________ analysis.

Cash Equivalency

To add two numbers on an HP12C calculator, you key in the first number and then:

[ENTER]

USPAP is fundamentally about

Ethics and competency

Using your financial calculator, what answer results from the following keystrokes: 2 [enter] 3 [+] 8 [x] ?

40

On your calculator add 75,000 to 63,000 and then divide by 10. Then, subtract 1,800, then multiply by 12. The answer is:

144,000

Standards Rule 1-1 of USPAP states that an appraiser must:

Be aware of, understand, and correctly employ those recognized methods and techniques necessary to produce a credible appraisal

Which principle holds that value is created by the expectation of benefits to be derived in the future?

Anticipation

Prior to listing his property for sale, the owner spent $35,000 remodeling the bathroom. The market will only bear $20,000 of this expenditure. Which economic principle does this demonstrate?

Law of decreasing returns

The debt coverage ratio measures a property's ability to meet its debt service requirements out of _____________

Net operating income

A common denominator of most definitions of market value is that the buyer and seller are:

Typical

The difference between a property selling for $30,000 thirty years ago and selling for $100,000 today is predominantly a matter of:

Loss in the purchasing power of the dollar

Justice Oliver Wendell Holmes said that:

All values are anticipations of the future

The basic formula for dealing with rates is:

I ÷ R = V

An investor has the opportunity to purchase a property which generates an income of $10,000. The appropriate multiplier for this property is 100. Applying the basic formula, what would the value of that property be?

$1,000,000

The basic formula when dealing with multipliers is:

I x M = V

The market value definition for use with federally insured financial institutions:

Refers to a reasonable exposure time

A common thread within various definitions of market value is:

Buyer and seller are willing and knowledgeable

The abbreviation PTCF means:

Pre-tax cash flow

What is the abbreviation for land value?

VL (V sub L)

On your HP, calculate the mean of 44,000, 46,000, 50,000, 54,000, and 56,000.

50,000

To clear a keying error with the HP12C, press:

CLX

On your HP, calculate the mean of 880,000, 925,000, 968,000, 867,000 and 905,000.

909,000

You are working on a six functions of a dollar problem and need to change the sign of an entry. Which key on the HP12c would you use?

[CHS]

On the HP12c calculator, the key with the x with a line over it is used to:

Calculate the mean

Given the following formula, which function would be performed first: {[28 - 5 x (10 - 3 x 3 )] ÷ 2}2 the answer is:

10-3 x 3

Which statement is TRUE regarding market value?

There are many different market value definitions in common use.

The difference between the abbreviations BTCF and ATCF is:

One is before and one is after

The abbreviation OER stands for:

Operating expense ratio

For estimating value using a capitalization rate, what is the basic formula?

I ÷ R = V

What is the process of converting income to value?

Capitalization

Investors are drawn to a particular investment property by the prospects of future financial benefits of owning that property.

true

Using the numbers 100, 103, 105, 106, and 108, calculate the mean.

104.4

For one property, the Sales Comparison Approach indicates a value of $325,000. The Cost Approach reflects a value of $315,000, and the Income Approach yields $295,000 as an indicated value. Using the weighted mean methodology and giving 60% weight to the Income Approach, 10% to the Cost Approach, and 30% to the Sales Comparison Approach, what is the indicated reconciled value?

$306,000

Using the numbers 33, 37, 39, 40, and 44, calculate the standard deviation.

4.04

Subject property is 4,500 square feet. Sales of similar properties in the area were $120,000 for 4,000 square feet; $140,000 for 6,000 square feet; and $150,000 for 7,000 square feet. Using the linear regression keystrokes on your calculator, compute the indicated value of the subject property.

$125,000

For one property, the Sales Comparison Approach indicates a value of $240,000. The Cost Approach reflects a value of $205,000, and the Income Approach yields $215,000 as an indicated value. Using the weighted mean methodology and giving 50% weight to the Income Approach, 30% to the Cost Approach, and 20% to the Sales Comparison Approach, what is the indicated reconciled value?

$217,000

In reconciling to a final value; an appraiser places 50% of the weight on the Income Approach, 25% of the weight on the Cost Approach and 25% of the weight on the Sales Comparison Approach. This is an example of:

Weighted mean

Using the numbers 33, 37, 39, 40, and 44, calculate the mean.

38.60

Linear regression can be used to:

All of the above

Income from a property increases 6% per year. What is the income to be next year if it was $45,000 this year?

$47,700

Comparable #1 went under contract on February 28, 2012. The sale closed 42 days later. What was the date of closing?

April 10, 2012

Due to an economic downturn, an investor had to reduce his asking rent from $12.00 per square foot to $10.50 per square foot. On a percentage basis, what decrease in rent does that represent?

12.5%

What date would be 130 days from May 15, 2008?

September 22, 2008

The number 20,000 is what percentage of the number 336,000?

5.95

What is the percentage of increase from $245,000 to $280,000?

14.29

The number 12,450 is what percentage of the number 320,000?

3.89

How many days were there between January 29, 2007 and October 14, 2007?

258

An investor wants to sell his office building which generates an annual income of $45,000. The asking price is $500,000. Another investor, who is interested in purchasing the building has offered $450,000. What rate was the seller seeking?

.09

What is the product of -2 x -10?

20

In fractions, what action is indicated when a number is above the line and another number is below the line?

Divide the top by the bottom

Analyzing data to determine variances from the mean is called:

Standard deviation

Applying the I/RV formula, if I = $10,000 and R = .08, what is V?

$125,000

Using the numbers 100, 103, 105, 106, and 108, calculate the standard deviation.

3.05

Interest earned on the original investment amount and on previously earned interest is called:

Compound Interest

"A yield rate used to convert future payments or receipts into present value" is the definition of:

Discount rate

According to Webster's Dictionary, "interest paid on both the principal and on accrued interest" is the definition of

Compound interest

"Money paid for, or earned by, the use of capital; a return on capital as distinguished from a return of capital" defines

interest

The Ellwood Formula is a method of yield capitalization that is only applicable to properties with stable income streams.

False

A lump-sum benefit that an investor receives at the termination of an investment is called the

Reversion

"The present worth of an income stream (cash flow)" describes which column of the Six Functions of $1 table?

Column 5

Using the 9% table you printed out for Chapter 4, calculate the present value of $10,000 at 9% for 7 years? (HINT: if you are asked for present value there are only two columns to look at; one for lump sum and one for periodic payments).

$5,470.34

What is the present value of $25,000 at 9% for 8 years? (HINT: if you are asked for present value there are only two columns to look at; one for lump sum and one for periodic payments)

$12,546.65

How much has to be deposited each year for 10 years at 9% to accumulate $30,000?

$1,974.60

How much has to be deposited each year for 8 years at 9% to accumulate $15,000?

$1,360.11

Columns 1, 2 and 3 basically are opposite functions Columns 4, 5 and 6 of the Six Functions of $1 table.

True

The mathematical process used with all of the six functions of a dollar is:

Multiplication

$1,500 deposited each year for 5 years at 9% will grow to

$8,977.07.

Compute the annual mortgage payment for a $30,000 loan at 9% for 10 years.

$4,674.60

$550 deposited each year for 8 years at 9% will grow to

$6,065.66

"A rate of return on capital used to convert future payments or receipts into present value; usually considered to be a synonym for yield rate" is the definition of:

Discount rate

What is the present value of $25,000 at 9% for 8 years? (HINT: if you are asked for present value there are only two columns to look at; one for lump sum and one for periodic payments).

$12,546.65

$82,000 deposited in an account earning 9% for 3 years will grow to

$106,192.38.

$5,000 deposited in an account earning 9% for 6 years will grow to

$8,335.50.

Compute the annual mortgage payment for a $96,000 loan at 9% for 10 years.

$14,958.72

What is the future value of installments of $3,000 at the end of each year for 12 years at 4%?

$45,077.42

An investor buys an annuity that pays 5% interest. The cash deposit for the first year is $2,000. Each successive year, the investor deposits an additional $2,000 in the same account. At the end of 10 years, what will be the balance in that account?

$26,413.57

How much has to be deposited each year for 10 years at 5% interest to accumulate $40,000?

$3,180.18

At 2.5% interest for 20 years, $8,000 will grow to:

$13,108.93

An investor plans to replace the HVAC in 4 years. The cost will be $4,000. If he plans to deposit $500 a year into an account bearing an interest rate of 7%, will he have enough to pay for the HVAC at the end of 4 years?

No

An investor plans to make periodic deposits to a reserve for replacement fund so that he can replace the roof of the building in 6 years. At a safe rate of 3%, how much needs to be deposited every year so the balance in the account will be $15,000 in six years?

$2,562.26