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FIN 331 FINAL EXAM QUESTIONS AND ANSWERS
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FIN 331 FINAL EXAM QUESTIONS AND ANSWERS
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FIN 331 FINAL EXAM QUESTIONS AND ANSWERSSuppose you own a house that you are renting out to a group of college students for the
10 month academic year. You are charging $1,000 per month in rent. You will collect the
first rent payment today and then on the 1st of the month each month thereafter. What
is the value of this investment opportunity to you today if you could reinvest your income
at an annualized rate of 6%?
A. $11,677.03
B. $9,730.41
C. $9,779.06
D. $9,677.77 - $9,779.06
Although deeds can only deliver what a grantor actually owns, they can still vary in
"quality." Which of the following types of deeds is considered to be the "highest quality"
because it contains the full set of legal promises the grantor can make?
A. general warranty deed
B. deed of bargain and sale
C. quitclaim deed
D. special warranty deed - general warranty deed
Unlike other forms of evidence of title, title insurance guards the grantee against certain
risks. However, there are a number of important limits to title insurance. Which of the
following is an example of the limits to title insurance?
A. It does not protect against legal attack on the owner's title arising from a claim that
diminishes the owner's rights of use.
B. It does not protect a grantee against loss of the property in case of an unsuccessful
title defense.
C. It does not protect a grantee against the legal costs of defending the title.
D. It does not protect the grantee from the threat of physical damage to the property. - It
does not protect the grantee from the threat of physical damage to the property.
State laws may provide local governments the power to plan and control urban
development outside their boundaries until annexation can occur. In doing so, the local
government establishes what is more commonly referred to as:
A. urban sprawl.
B. urban service.
C. extraterritorial jurisdiction.
D. concurrency. - extraterritorial jurisdiction
Which of the following core property types includes buildings designed for the temporary
storage of goods such as inventory, company records, and excess raw materials?
A. office
B. apartment
C. retail
D. warehouse - warehouse
,Which of the following statements best describes the impact of a rate cap on an
adjustable rate mortgage (ARM)?
Incorrect answer:
A. A rate cap decreases the overall level of interest rate risk exposure on the mortgage
loan for both borrower and lender.
B. A rate cap decreases the degree of interest rate risk borne by the borrower relative to
the lender.
C. A rate cap increases the overall level of interest rate risk exposure on the mortgage
loan for both borrower and lender.
D. A rate cap increases the proportion of interest rate risk borne by the borrower relative
to the lender. - A rate cap decreases the degree of interest rate risk borne by the
borrower relative to the lender.
Given the following information, determine the value of having an additional 500 square
feet of living space. Assume that the comparable properties are similar in all other
attributes besides those listed in the table below. (Look at math question 10 in excel)
A. $10,000
B. $16,000
C. $6,000
D. $4,000 - $10,000
Given the following information, determine the value of having an additional bedroom.
Assume that the comparable properties are similar in all other attributes besides those
listed in the table below. (look at math question 11 in excel) - $5,000
The majority of residential units in the U.S. are contained in multifamily structures, or
apartment buildings that contain five or more housing units. Which of the following
multifamily structures will range in height from four to nine stories and are typically
found in both cities and suburbs?
A. midrise apartment buildings
B. condominiums
C. garden apartments
D. high-rise apartment buildings - midrise apartment buildings
Rent for residential units is typically quoted as:
A. a dollar amount per year.
B. an annual cost per square foot.
C. a monthly cost per square foot.
D. a dollar amount per month. - a dollar amount per month
Suppose you have taken out a $400,000 fully amortizing fixed rate mortgage loan that
has a term of 15 years and an interest rate of 3.75%. In month 1 of the mortgage, how
much of the monthly mortgage payment does the interest portion consist of?
A. $1,250.00
B. $1,658.89
C. $9.09
,D. $2,908.89 - $1,250.00
In the history of eminent domain, the Kelo v. New London, Connecticut decision of the
U.S. Supreme Court in 2005 affirmed the possibility of a community being:
A. able to use eminent domain to acquire property for private development if it serves
public purpose and the current land use is blighted.
B. able to use eminent domain to acquire property for private development if it serves
public purpose even if the current land use is not blighted.
C. restricted to use of eminent domain only for actual government (public) land uses.
D. prohibited from using eminent domain. - able to use eminent domain to acquire
property for private development if it serves public purpose even if the current land use
is not blighted.
Even after a property goes into foreclosure, it is still possible for the borrower to reclaim
the property as long as they produce the outstanding mortgage balance and all
foreclosure costs incurred to that point. In a state such as Florida, this right may even
extend beyond the date of the foreclosure sale. When this occurs, this right is more
commonly referred to as:
A. statutory redemption.
B. equity of redemption.
C. substantive default.
D. strategic default. - statutory redemption
While a sublease and an assignment are two distinct choices for a tenant who wishes to
transfer their rights during the term of a lease, both agreements:
A. transfer only a subset of rights to another party.
B. grant another party the right to cancel the original lease before expiration.
C. transfer all of a tenant's rights to another party.
D. maintain that the original tenant be held liable for fulfilling the original lease unless
otherwise specified - maintain that the original tenant be held liable for fulfilling the
original lease unless otherwise specified
Given the following information, calculate the balloon payment for a partially amortized
mortgage.
Loan amount: $84,000
Term to maturity: 7 years
Amortization Term: 30 years
Interest rate: 4.5%
Monthly Payment: $425.62
A. $73,102
B. $30,620
C. $84,000
D. $9,458 - $73,102
, The most relevant cash flow measure for investors in commercial real estate who own
properties through a sole proprietorship, limited partnership, limited liability company, or
private equity fund is the property's:
A. potential gross income.
B. after-tax cash flow.
C. before-tax cash flow.
D. net operating income. - after-tax cash flow
Suppose that an owner of a multi family property is interested in renting out a two-
bedroom apartment for $1,000 a month for the next year. The owner requires rent to be
paid at the beginning of the month, at which point she will deposit the rental check into a
local savings account. If the annual interest that the owner can earn on this account is
5% and interest is compounded monthly, how much will the owner have in his savings
account at the end of the year?
A. $12,330.01
B. $12,278.86
C. $15,917.13
D. $13,330.02 - $12,330.01
Standard mortgage loans require monthly payments typically composed of two
components: interest and principal repayments. When scheduled mortgage payments
are insufficient to pay all the accumulating interest, causing some interest to be added
to the outstanding balance after each payment shortfall, the loan is said to be:
A. partially amortizing.
B. fully amortizing.
C. negatively amortizing.
D. non-amortizing. - negatively amortizing
Assume a retail tenant is paying a base rent of $120,000 per year (or $10,000 per
month). In addition, the tenant must pay 7 percent of gross store sales in excess of
$143,000 per month as percentage rent. If the store produces $170,000 in gross sales
in a month, what is the total rent due for the month?
A. $10,158
B. $21,900
C. $10,000
D. $11,890 - $11,890
Determine the net present value (NPV) of an investment decision to purchase a
property for $90,000 that will generate annual cash flows of $10,000 per year for eight
years and sell for $80,000 at the end of the eight year holding period, if the appropriate
discount rate is 10%? (Note: Assume payments are made at end of year.)
A. −$609
B. −$2,475
C. +$2,475
D. +$670 - +$670
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