5. From question 4 above, if you had a choice you would prefer that the percentage of the total return coming from the property flows be than that from the property sale a. Higher than b. Lower than 6. As it relates to the cap rate method of valuing commercial properties, assuming there were no major improvements or upgrades to a property over the period, you would generally anticipate that the future cap rate for a property in ten years would be _ the cap rate used to purchase the property today. Ignore expected changes in interest rates for this question. a. the same as b. lower than C. higher than d. exactly equal to 7. If a property had a current NOI of $900,000 and a lender was willing to provide an interest only loan with a minimum Debt Service Coverage Ratio (DSC) of 1.25, the maximum debt service the property could support would be If instead the loan was fully amortizing and the DSC was maintained at 1.25, the amount of debt (mortgage amount) the property could support compared to the interest only loan would be a. $1,125,000, the same b. $720,000, lower c. $720,000, the same d. $1,125,000, higher e. $720,000, higher 8. When evaluating whether you should sell or hold onto a commercial property you own which was financed with a fully amortizing loan, which of the following are TRUE: a. If held, your mortgage payment would decrease going forward b. One rational reason to sell might include the opportunity to diversify into other properties c. If held, the principal component of your payments would decrease going forward d. If held, the interest component of your payments would decrease going forward e. Both B and D 9. To assess the performance of a property (such as calculating NPV or IRR) purchased on an all cash basis (no leverage used), it would be acceptable to use the property's. . If instead you were computing what you expect to be your return on the property after using leverage, you would want to use Ignore taxes for this question. a. Free cash flow, NOI b. Gross Potential Income, Free cash flow c. Free cash flow, Gross potential income d. NOI, Free cash flow 10. Mortgage backed bonds are likely to provide you a predictable return of both your interest and principal than pass through mortgage back securities and are therefore also more likely to provide a ield for comparable mortgage securities. Page 2