IAAO 102 EXAM / IAAO 102 EXAM PREP/IAAO 102 EXAM PRACTICE ACTUAL EXAM
QUESTIONS AND CORRECT DETAILED ANSWERS|AGRADE/LATEST UPDATE 2026!!!
Question 1
Which underlying economic principle provides the primary basis for the income capitalization
approach?
A) Substitution
B) Contribution
C) Anticipation
D) Balance
E) Competition
Correct Answer: C) Anticipation
Rationale: The principle of anticipation states that value is created by the expectation of
future benefits, such as a stream of income or capital gain. In the income approach, an
appraiser estimates the present value of these expected future benefits.
Question 2
What is the basic fundamental equation used in the income approach to determine value?
A) Value = Rate / Income
B) Value = Income × Rate
C) Value = Income / Rate
D) Value = Potential Gross Income - Expenses
E) Value = Effective Gross Income / Multiplier
Correct Answer: C) Income divided by rate equals value
Rationale: The IRV formula (𝑉 = 𝐼/𝑅) is the foundation of direct capitalization, where "I"
is the Net Operating Income (NOI), "R" is the capitalization rate, and "V" is the indicated
value.
Question 3
In the valuation of an apartment building, which of the following is NOT considered a typical
unit of comparison?
A) Price per unit
B) Price per room
C) Price per square foot
D) Price per acre
E) Price per bedroom
Correct Answer: D) Price per acre
Rationale: Price per acre is a unit of comparison typically used for vacant land or large
industrial sites. Apartment buildings are valued based on their density (units, rooms,
bedrooms) or their size (square feet).
Question 4
Which of the following is a characteristic of the Income Approach to value?
QUESTIONS AND CORRECT DETAILED ANSWERS|AGRADE/LATEST UPDATE 2026!!!
Question 1
Which underlying economic principle provides the primary basis for the income capitalization
approach?
A) Substitution
B) Contribution
C) Anticipation
D) Balance
E) Competition
Correct Answer: C) Anticipation
Rationale: The principle of anticipation states that value is created by the expectation of
future benefits, such as a stream of income or capital gain. In the income approach, an
appraiser estimates the present value of these expected future benefits.
Question 2
What is the basic fundamental equation used in the income approach to determine value?
A) Value = Rate / Income
B) Value = Income × Rate
C) Value = Income / Rate
D) Value = Potential Gross Income - Expenses
E) Value = Effective Gross Income / Multiplier
Correct Answer: C) Income divided by rate equals value
Rationale: The IRV formula (𝑉 = 𝐼/𝑅) is the foundation of direct capitalization, where "I"
is the Net Operating Income (NOI), "R" is the capitalization rate, and "V" is the indicated
value.
Question 3
In the valuation of an apartment building, which of the following is NOT considered a typical
unit of comparison?
A) Price per unit
B) Price per room
C) Price per square foot
D) Price per acre
E) Price per bedroom
Correct Answer: D) Price per acre
Rationale: Price per acre is a unit of comparison typically used for vacant land or large
industrial sites. Apartment buildings are valued based on their density (units, rooms,
bedrooms) or their size (square feet).
Question 4
Which of the following is a characteristic of the Income Approach to value?
