REE3043 Exam 1 Questions With Revised
Answers
The value of something results from its - answerUtility and scarcity (classical economics)
Urban economics - answerBranch of economics that extends the basic ideas of early
neoclassical and classical economists to better understand and predict how h...
The value of something results from its - answer✔✔Utility and scarcity (classical economics)
Urban economics - answer✔✔Branch of economics that extends the basic ideas of early
neoclassical and classical economists to better understand and predict how humans use space.
Focuses on urban problems like housing issues
Institutions - answer✔✔Formal arrangements and associations that members of society make to
support fundamental economics and social activities
Marshall contended that in a perfect market the value of a good - answer✔✔Was equal to its
price
Unsecuritized commercial mortgages - answer✔✔Commercial mortgages held in the portfolio of
lenders
Financial assets - answer✔✔Stocks, bonds, and cash
Real estate in the US represents what portion of the world's wealth? - answer✔✔15%
How much of the wealth of real estate in the US is residential property? - answer✔✔75%
Business real estate accounts for what percent of the total value of real estate in the US? -
answer✔✔15%
Five perspectives of real estate - answer✔✔Investment, market, valuation, mortgage finance, and
legal
Early economists concluded that what were the resources of society that were combined by
entrepreneurs to form useful products? - answer✔✔Land, labor, and capital
Alfred Marshall argued that value results from the intersection of - answer✔✔Supply and
demand, neoclassical economics
T or F: the fundamentals of supply and demand explain all aspects about individual and market
behavior in valuing space - answer✔✔False, much behavior is unexplained due to the role of
institutional arrangements like laws and regulations
In addition to affecting market operations, lease contracts serve to - answer✔✔Formally identify
a property's rent and the intersection of supply and demand
Real estate can be classified as both a - answer✔✔Financial asset and a real assset
Most of the land is every state is owned by - answer✔✔The government
Real estate is what percent of the world's wealth? - answer✔✔50%
The most valuable component of the US real estate market is/are - answer✔✔Homeowners and
residential mortgage lenders
Which real estate owners carry more debt as a percentage of the total property value? -
answer✔✔Residential mortgages 44%
Who came up with the time value of money calculations? - answer✔✔Fibonacci
What constitutes an efficient market? - answer✔✔1. product homogeneity
2. free markets, no transaction costs
3. perfect knowledge about competing goods and identical future expectations
4. individual buyers and sellers cannot influence market prices
5. products can be divided and are mobile
ex. gas, milk
real estate is an inefficient market
Effective cost - answer✔✔The true borrowing cost, including the effect of up front financing
costs
Capitalization rate - answer✔✔Expected cash flow in one year divided by initial acquisition
price. Measure of the current relationship between a property's income stream and price
Internal rate of return - answer✔✔Discount rate which equates the present value of the cash
inflows to present value of cash outflows
Investment value - answer✔✔The value of a property to a particular investor
Mortgage Value - answer✔✔The present worth of the lender's rights to receive a series of
expected mortgage payments from the borrower over a specified period, given an interest rate
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