REAL 4000 Test 2 Dietz Study Guide with Complete Solutions

REAL 4000 Test 2 Dietz Study Guide with Complete Solutions Value of a property or mortgage thus depends on: - Answer️️ -1. Magnitude 2. Timing 3. Riskiness of expected cash flows TVM timelines always starts with - Answer️️ -- "Time Zero" Mortgage (debt) timelines normally - Answer️️ -30 years Most commercial property ownership - Answer️️ -3-7 years Amount at time "zero" - Answer️️ -PV A single cash flow at any future time point - Answer️️ -FV A repeating amount of cash inflow or outflow, flow normally begins at end of first period, sometimes at time zero - Answer️️ -PMT This is the measure of time and the number of computations (compounds) - Answer️️ -N ©SOPHIABENNET@2024/2025 Wednesday, August 21, 2024 12:13 PM UNIVERSITY OF NORTH TEXAS AT DALLAS 2 Interest Rate, required return, rate of return, opportunity cost, discount rate, IRR, etc. This is some sort of rate (%) of return (yield) based on risk - Answer️️ -I/Y a fixed amount of money paid or received at the end of every period. Often another name for fixed PMT. - Answer️️ -Ordinary annuity Any future cash inflow or outflow occurring only once (often another name for FV). - Answer️️ -Lump sum payment (1 + r)^n - Answer️️ -FV of Lump Sum Formula (1 + r)^n - 1 / r - Answer️️ -future value of an annuity formula 1 / (1 + r)^n - Answer️️ -Present value of a lump sum 1-[1/(1 + r)^n] / r - Answer️️ -Present value of annuity ways to solve for time "zero" - Answer️️ -1. find the PVs of six different cash flows and sum the results 2. PV of a five-year $10,000 annuity + PV of a lump sum of $100,000 in year 5 3. Solve as a combined PV problem when cashflow is uneven: - Answer️️ -1. find the PVs of six different cash flows and sum the results ©SOPHIABENNET@2024/2025 Wednesday, August 21, 2024 12:13 PM UNIVERSITY OF NORTH TEXAS AT DALLAS 3 2. Solve using the variable cash flow capacity of your calculator (CF and NPV buttons) 3. Use a spreadsheet the lower the price of a property = - Answer️️ -higher rate of return the higher the price of a property = - Answer️️ -the lower the rate of return risk and return are ____________ related - Answer️️ -directly what property types are considered high risk? - Answer️️ -land speculation hospitality restaurants what property types are considered low risk? - Answer️️ -AAA rated mortgage bonds Net leased to AAA tenant what property types are considered medium risk? - Answ