RM 450 EXAM 1 questions with verified
solutions
1. When viewed as a tangible asset, real estate can be defined as the land and its permanent
improvements. Improvements on the land include:
A. fences
B. walkways
C. sewer systems
D. streets - correct answer ✔✔Fences
2. Real estate is property, which can be either a tangible or an intangible asset. Which of the following
would be considered an intangible asset?
A. Land
B. Building
C. Mortgage
D. Motor home - correct answer ✔✔C: Mortgage
3. When the value of land is considered, it is important to distinguish between land and raw land. Raw
land refers to a(n):
A. building site
B. structure on the land
C. property's infrastructure
D. area that does not include any improvements - correct answer ✔✔D: Area that does not include any
improvements
4. The size of a single family residential lot is typically:
A. less than one acre
B. between one and two acres
C. between two and three acres
,D. greater than three acres - correct answer ✔✔A
5. As of 2008, the single largest asset category in the net worth portfolios of households is:
A. government and corporate bonds
B. stocks and mutual fund shares
C. consumer durable goods
D. housing - correct answer ✔✔D
6. As of December 2008, the market value of outstanding real estate mortgage debt was:
A. greater than the market value of corporate equities
B. less than the market value of U.S. Treasury securities
C. less than the market value of corporate and foreign bonds
D. greater than the market value of corporate, foreign, and U.S. Treasury debt securities combined -
correct answer ✔✔D
7. Real estate values derive from the interaction of three different sectors in the economy. Which of the
following sectors serves to allocate financial resources among households and firms requiring funds?
A. User market
B. Capital market
C. Government
D. Local market - correct answer ✔✔B
8. The demand for real estate derives from the need that participants in the user market have for shelter
and convenient access to other locations. The primary participants in the user market include all of the
following EXCEPT:
A. owner occupants
B. tenants
C. renters
D. pension fund managers - correct answer ✔✔D
, 9. In 2007, the housing market was widely viewed as:
A. a resilient asset class that significantly softened the severity of the recession
B. a surging market pushing prices and new construction to unprecedented levels
C. the primary cause of a major economic downturn
D. unrelated to the condition of the U.S. economy - correct answer ✔✔C
10. Capital markets can be divided into four main categories: private equity, public equity, private debt,
and public debt. An example of a real estate asset that trades in the private equity market is:
A. real property
B. home mortgages
C. equity REITs
D. mortgage backed securities - correct answer ✔✔A
11. Primarily through land use controls and property tax policy, which of the following branches of
government has the largest influence on real estate values?
A. Local government
B. State government
C. National government
D. Foreign government - correct answer ✔✔A
12. Competition in the _________, where households and firms compete for the currently available
supply of locations and space, determines the level of rental income for each submarket and property.
A. user market
B. capital market
C. government
D. local market - correct answer ✔✔A
13. The expected stream of rental income is capitalized into value by converting expected future cash
flows into present value through a process called:
A. amortization
solutions
1. When viewed as a tangible asset, real estate can be defined as the land and its permanent
improvements. Improvements on the land include:
A. fences
B. walkways
C. sewer systems
D. streets - correct answer ✔✔Fences
2. Real estate is property, which can be either a tangible or an intangible asset. Which of the following
would be considered an intangible asset?
A. Land
B. Building
C. Mortgage
D. Motor home - correct answer ✔✔C: Mortgage
3. When the value of land is considered, it is important to distinguish between land and raw land. Raw
land refers to a(n):
A. building site
B. structure on the land
C. property's infrastructure
D. area that does not include any improvements - correct answer ✔✔D: Area that does not include any
improvements
4. The size of a single family residential lot is typically:
A. less than one acre
B. between one and two acres
C. between two and three acres
,D. greater than three acres - correct answer ✔✔A
5. As of 2008, the single largest asset category in the net worth portfolios of households is:
A. government and corporate bonds
B. stocks and mutual fund shares
C. consumer durable goods
D. housing - correct answer ✔✔D
6. As of December 2008, the market value of outstanding real estate mortgage debt was:
A. greater than the market value of corporate equities
B. less than the market value of U.S. Treasury securities
C. less than the market value of corporate and foreign bonds
D. greater than the market value of corporate, foreign, and U.S. Treasury debt securities combined -
correct answer ✔✔D
7. Real estate values derive from the interaction of three different sectors in the economy. Which of the
following sectors serves to allocate financial resources among households and firms requiring funds?
A. User market
B. Capital market
C. Government
D. Local market - correct answer ✔✔B
8. The demand for real estate derives from the need that participants in the user market have for shelter
and convenient access to other locations. The primary participants in the user market include all of the
following EXCEPT:
A. owner occupants
B. tenants
C. renters
D. pension fund managers - correct answer ✔✔D
, 9. In 2007, the housing market was widely viewed as:
A. a resilient asset class that significantly softened the severity of the recession
B. a surging market pushing prices and new construction to unprecedented levels
C. the primary cause of a major economic downturn
D. unrelated to the condition of the U.S. economy - correct answer ✔✔C
10. Capital markets can be divided into four main categories: private equity, public equity, private debt,
and public debt. An example of a real estate asset that trades in the private equity market is:
A. real property
B. home mortgages
C. equity REITs
D. mortgage backed securities - correct answer ✔✔A
11. Primarily through land use controls and property tax policy, which of the following branches of
government has the largest influence on real estate values?
A. Local government
B. State government
C. National government
D. Foreign government - correct answer ✔✔A
12. Competition in the _________, where households and firms compete for the currently available
supply of locations and space, determines the level of rental income for each submarket and property.
A. user market
B. capital market
C. government
D. local market - correct answer ✔✔A
13. The expected stream of rental income is capitalized into value by converting expected future cash
flows into present value through a process called:
A. amortization
