1. A free to float loan has no cap provisions.

a. This means the monthly loan term rates are the same as market rates

b. It does not have a situation where the loan balance can increase through time

c, The monthly payments change with market interest rate conditions

d. Only parts "a" and "b"

e. all of the above

_____2. The term Locational also called Economic and External depreciation refers to the following situation:

a. Normal wear and tear of the structure (building)

b. The need to install windows and an upgraded plumbing system

c. A flat roof on a building

d. Problems associated with the property's site

_____3. Repairable Physical Depreciation refers to:

a. Structural obsolescence that takes place over time

b. Carpeting, Paint and Use damage that occurs to a property

c. The interior layout of the property

d. All of the above

_____4.External Depreciation is calculated as a perpetuity, because the economic income damage is site related and does not change over time.

a. Trueb. False

_____5. The income approach used by banks when valuing properties and considered the best income approach method is the:

a. Present Value approach

b Gross Income Multiplier approach

c. Direct Capitalization approach

c. Mortgage-Equity approach

_____6. Income approaches for estimating the value of a property is primarily used for estimating the value of:

a. Older properties which are older than 25 years

b. Properties like schools, government buildings and gas stations

c. Commercial properties like stores, office and apartment buildings

d. The land

_____7. Repairable depreciation usually refers to:

a. repairing the structure of the building

b. repairing a land defect

c. replacing carpeting and painting

d. all of the above

_____8. If the vacancy and collection loss rates (V&C) for a property are substantial lower than for a given neighborhood then this may indicate that.

a. rents are the same as other properties in the area

b. rents are too high compared to other properties in the area

c. rents are too low comparted to other properties in the area

d. tenant selection is faulty

_____9. When negative amortization occurs with an Adjustable Rate Mortgage this indicates that:

a. the loan is subject to caps

b. the market rate is above the indexed interest rate

c, the interest due during a given month is higher than the monthly payment

d. all of the above

_____10. Most borrowers select an Adjustable Rate Mortgage when financing a home.

a. Trueb. False

1. Adjustable Rate Mortgage (ARM): The Loan is for $325,000 for 25 years payable monthly with MPVIFA terms for years 1 through 4 capped at the rates for the respective years at 7%; 9%, 12% and 4%.The market rates are 8%; 11%; 13% and 4%.

Calculate and show Tables 1 &2 for determining the monthly payments and loan balances (see solution for handout problems on D2L for layout)

Use the heading for:

Table 1: Loanyearsrates/timeMPVIFAMP

Table 2: yearsInterestAmortization/MonthMFVIFAAmortization/Year

Calculate the Appraised Value of the Commercial Property:

2. Replacement Decision:Use the following information to determine the replacement value of the building and property.The building measures 200 x 150 feet, 3 stories high, and would cost $250 per foot to replace. It has an economic life of 25 years and 8 years have lapsed since the building was constructed.Additional Information follows:

• Discount rate 10%
• Repairable Physical Depreciation$65,000
• Repairable Functional Depreciation$20,000
• Non-Repairable Functional Depreciation$70,000/year
• Non-Repairable External Depreciation$10,000/year
• Site Value$1,000,000

Calculate the Value of this property:LABELS are required

3. GRM/GIM Estimates of Appraised Value:

SubjectComp. 1Comp. 2Comp. 3

V & C rates4%4%4.6%5.1%

Units190185185200

Average Rent$980$995$1020$1020

Selling Price?$15,200,000$15,300,000$15,500,000

Calculate the Gross Rent Multiplier for the Comps:

Show the estimated price range from a low value to a high value for the subject property: