| Question | Workings | Correct Answer |
| 1. One way to calculate the present value of a single payment is with the following formula: PV = FV × (1 + i)^n | The formula for present value (PV) is PV = FV / (1 + i)^n. The given formula is for future value (FV). | b. False |
| 2. The future value of $800 deposited today would be greater if that deposit earned 8% rather than 7.75%. | Higher interest rates lead to higher future values due to the compounding effect. | a. True |
| 3. The longer you hold an investment (i.e., time period increases), the higher the present value will be. | Present value decreases as the time period increases because future cash flows are discounted more. | b. False |
| 4. The future value of a $1 annuity compounded at 5% annually is greater than the future value of a $1 annuity compounded at 5% semi-annually. | More frequent compounding increases the future value, so semi-annually is better. | b. False |
| 5. The future value of $1,000 compounded annually for 8 years at 12% may be calculated with the following formula: FV = $1,000 * (1 + 12%)^8. If the same $1,000 was compounded quarterly, what formula would you use to calculate the FV? | Compounding quarterly requires adjusting the interest rate and the number of periods. Quarterly rate: 12% / 4 = 3%. Number of periods: 8 years * 4 = 32 quarters. | d. FV = $1,000 * (1 + 3%)^32 |
| 6. The internal rate of return: | IRR is known as the investor’s yield, represents a compound rate of interest, and is calculated by setting the price equal to cash flows and solving for the interest rate. | d. Can be defined by all of the above |
| 7. The name for a series of equal, annual cash flows that are received at the end of each period is: | An ordinary annuity involves cash flows at the end of each period. | a. Ordinary annuity |
| 8. An investment that costs $105,000 today is expected to produce the following cash inflows over each of the next 5 years: $20,000, $25,000, $23,000, $22,000, and $21,000. What is the IRR (compounded annually) for this investment? | The IRR is the rate at which the net present value of the cash flows equals zero. | d. 18.9% |
| 9. A __________ estate represents the most complete form of ownership of real estate; the owner is free to divide it up into lesser estates and sell, lease, or borrow against them as he or she wishes. | A fee simple estate represents the most complete ownership of real estate. | c. Fee simple |
| 10. A lessee is a person who holds the title to a piece of property. | A lessee holds a leasehold interest, not the title. | b. False |
| 11. What legal document conveys title from one person to another? | A deed is the legal document that transfers title. | c. Deed |
| 12. A mortgage is the same thing as a note. | A mortgage is a security interest, while a note is a promise to repay the loan. | b. False |
| 13. A “short sale” of real estate is: | A short sale occurs when the sale proceeds are less than the outstanding loan balance. | c. A sale in which the proceeds from the sale are less than the balance owed on the loan secured by the property sold |
| 14. A mortgage is BEST defined as a legal document that: | A mortgage secures a loan by naming real estate as collateral. | d. Names real estate as the security or collateral for the repayment of a loan |
| 15. What term BEST describes the borrower who is personally liable for a debt obligation related to the purchase of a home? | The borrower who is liable for the debt is the mortgagor. | c. Mortgagor |
Instant Download on Payment
100% satisfaction guarantee
Guaranteed Privacy
Secure Payment
Money Return Guarantee
No strings attached
Available 24/7
Plagiarism Free
Written by professional
Free Revisions
All Types of Papers
