REE 4204 Sirmans Exam Questions With Correct Answers

EXAM STUDY MATERIALS July 30, 2024 11:26 AM REE 4204 Sirmans Exam Questions With Correct Answers Finance - answer✔✔-study of the process, institutions,markets and instruments used to transfer money and credit between individuals, business, and gov applied economics - answer✔✔-study of the allocation of resources for the purpose of producing goods and services for various members of society -considers time value of money and implications of the interest rates -focused on cash flows not profts -makes extensive use of the concept of risk Real estate finance - answer✔✔-study of institutions, markets, and instruments used to transfer money and credit for the purpose of developing or acquiring real property real property - answer✔✔-rights,powers, and privileges associated with the use of real estate real estate - answer✔✔land and all the fixed immovable improvements on it Environment of real estate - answer✔✔the institutions that create and purchase real property and the markets within which they are transferred financial intermediaries - answer✔✔-the financial institutions that channel funds from the surplus income units to the deficit income units -commercial banks -thrift instituions - S&L associations and mutual savings banks -investment companies -pool the funds of savers and invest the funds in a portfolio of assets - insurance companies - receive periodic or lump sum payments from individiudals or organizations in return for a promise to make future payments if certain events occur -pension funds Direct financing - answer✔✔- when the flow of funds takes the place with out the use of intermediaries primary mortgage market - answer✔✔-market where mortgages are originated EXAM STUDY MATERIALS July 30, 2024 11:26 AM secondary mortgage market - answer✔✔-fannie Mae, freddie Mac, ginnie mae -agencies and firms that purchase mortgages form other intermediaries or brokers that deal with surplus income units, using funds raised through the sales of securities they create -issue mortgages using mortgage pool s at collateral -a large and active secondary market makes assets more liqid Financial markets are divided into two ca tegories - answer✔✔1. money markets - short -term securities of 1 yr to less 2. capital markets -long term securities more than 1 yr to maturity (real estate financing takes place here) General lèvel of real estates with bonds - answer✔✔-no risk in bonds -the price of a bond is inversely related to and determined by the market required yield monetary theory of inflation - answer✔✔-the greater the rate of growth in money the greater the rate of inflation fisher equation - answer✔✔-inflation rate plays an import ant role in the market rate -I(nominal rate observed in the market)=r(real rate lender wants to receive)+p(expected inflation over the maturity) Risks in Real Estate - answer✔✔-default risk -risk that borrower will not repay the mortgage per the contract -callability risk -borrower might pay before maturity -maturity risk -the longer the maturity of an asset the greater the given change in interest rates -marketability risk -risk that the asset won't trade in a large organized market -inflation risk -risk in lo ss of purchasing power -interest rate risk - risk of loss due to change in market interest rates Municipal bonds - answer✔✔-least amount of risk involved -government treasury bonds -interest earned from these bonds is tax free, but have lower returns becaus e they are tax free Yield curve - answer✔✔-relates maturity and yield(return) at the same point in time -upward sloping -yield on long -term assets is greater than short term assets -downward sloping - happens when interest rates are really high