QUESTION 15 Bob buys a property with an 80% LTV interest only mortgage at an annual rate of 6%, with annual compounding and annual payments. Bob's annual cap rate for the first year is 8%. Which of the following is true about Bob's Return on Equity (ROE) for the first year? There is not enough information to answer this question ROE is lower than if he didn't use leverage ROE is higher than if he didn't use leverage ROE is the same as it would have been if he didn't use leverage QUESTION 16 Suppose you are considering two cities, city A with elastic housing supply and city B with inelastic housing supply. The two cities are otherwise exactly identical. Suppose you believe that housing demand in both cities will rise by exactly 20% over the next 3 years. Which city should have a bigger rise in house prices at the end of the 3 years holding all else constant? City B Both cities expect the same rise in house prices There is not enough information to answer this question City A