REE 4204 SIRMANS EXAM 1
QUESTIONS WITH VERIFIED
ANSWERS
The mortgage constant calculates the payment per dollar borrowed at a given interest
rate and term. - Answer-True
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 without the use of
intermediaries
primary mortgage market - Answer--market where mortgages are originated
, 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 categories - 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 important 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 loss 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 because 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
Liquidity premium theory - Answer--long-term rates tend to be higher than short-term
assets
Market segmentation theory - Answer--two markets for securities of different maturities
- assumes investors will not change their preferences as a result of yield discrepencies
QUESTIONS WITH VERIFIED
ANSWERS
The mortgage constant calculates the payment per dollar borrowed at a given interest
rate and term. - Answer-True
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 without the use of
intermediaries
primary mortgage market - Answer--market where mortgages are originated
, 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 categories - 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 important 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 loss 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 because 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
Liquidity premium theory - Answer--long-term rates tend to be higher than short-term
assets
Market segmentation theory - Answer--two markets for securities of different maturities
- assumes investors will not change their preferences as a result of yield discrepencies
