2. Which of the following statement about the investment performance ratios is FALSE? (A) Capitalization rate is equal to the first year before-tax cash flows divided by the initial equity investment. (B) Debt coverage ratio measures the affordability of the borrowers and should be at least 1.2 to meet the standard underwriting criteria. (C) Internal rate of return measures the total rate of return that investors expect to earn on all equity invested. (D) Equity dividend ratio measures the current return on equity invested. Which of the following statement about participation loan is FALSE? (A) The lender offers a lower stated interest rate on the loan for a participation loan. (B) The lender participates in some way in the income generated from the property. (C) The lender does not have a strong incentive to use participation loan because it decreases the payments in the first couple of years, especially for new development projects. (D) The participation loan protects the rate of returns to lender in case of unexpected inflation. 4. Which of the following would NOT be considered as an advantage of using a sale-leaseback of land? (A) The sale-leaseback in effect provides 100% financing on the land. (B) Lease payments are tax deductible. (C) The sale-leaseback provides the same depreciation deductibility. (D) The land may appreciate over the holding period. 5. Which of the following is FALSE regarding interest only loans? (A) They usually have balloon payments. (B) They have greater amortization than conventional loans. (C) They result in more cash flow to the investor than conventional loans in the early life of loans. (D) They allow for a higher first-year debt coverage ratio than conventional loans. 6. Which of the following is FALSE regarding accrual loans? (A) The rate used to calculate the loan payment is different than the rate used to calculated actual interest charged (B) Accrual loan may incur negative amortization. (C) They usually have balloon payment at the end of term. (D) Accrual loans are short-term and are used to target specific debt coverage ratio. 7. Which of the following is FALSE regarding convertible mortgages? (A) A convertible mortgage allows the lender to purchase a full or a partial interest in the property at the end of some period. (B) A borrower using convertible mortgage is obligated to exercise its option to purchase certain percentage of interest in the property. (C) The similarity between participation loan and convertible mortgage is that they both receive additional returns from the property if it performs well. (D) All of the above