REE 3043 EXAM 2 QUESTIONS WITH
CERTIFIED ANSWERS
A statement by a real estate investment trust that it invests only in apartment buildings
that are larger than 50 units and less than 10 years old is an example of an investment:
- Answer-D. Policy statement
The rent that can be obtained when leasing a property in an open and competitive
market is termed: - Answer-Market Rent
Income properties are purchased by investors who desire primarily to receive: - Answer-
A. periodic income and appreciation
You are considering purchasing a retail building for $5,000,000 (50,000 square feet of
net lease area). You expect to lease in the first year for $18 per square foot per year.
Vacancy and collection losses are expected to be 9 percent of PGI and operating
expenses 45 percent of EGI. What is the estimated net operating income (NOI) for the
first year? - Answer-C. 450,450
List the two economic principles that have a significant influence on the determination of
land uses within a metropolitan area - Answer-1. Transportation costs and the desire of
firms and individuals minimize such costs.
2. The ability to substitute intensive capital improvements for land availability ( eg high-
rise construction versus suburban office parks)
, Perfectly competitive asset markets include all of the following characteristics, except: -
Answer-D. highly regulated
A market in which investors do not use information about previous transactions and
other publicly available information is termed a : - Answer-A. Inefficient market
Early economists argued that good access creates value because it results in: -
Answer-B. Lower transportation costs
In determining where to locate, a firm considers the ability of the firm to substitute
building improvements for: - Answer-D. Land
In an urban area, the most desired locations are occupied by: - Answer-A. the most
productive use.
Transportation costs , and the price of land with as the distance to an
economic activity center of a city increases: - Answer-B. Increases, decreases
What type of rent is generally recognized as the best measure of the true cost of
occupied space? - Answer-C. effective. rent
As discussed in the text, the Q statistic is defined as: - Answer-D. property's market
value divided by its replacement cost.
T/F During the past decade in the United States and in many other developed nations,
the real estate asset market evolved into two markets: the traditional property market
and the securitized market. - Answer-True
T/F Deviations in transaction prices from the estimated market values supported by
market fundamentals are often referred to as 'noise'. - Answer-True
T/F A Q ratio greater than one indicates that the price of existing properties appear
cheap relative to their replacement cost. - Answer-False
T/F Expectations of variability are embedded in the discount rate, which in turn affect
asset prices. - Answer-True
T/F A speculative bubble exists when developers purchase large tracts of land
surrounding an area in anticipation that growth will occur in that area. - Answer-False
T/F One explanation for the existence of boom-and-bust periods (cycles) in real estate
is that investors need substantial periods of time to accumulate and then to invest
funds. - Answer-False
T/F Rents reflect the price of space and sale prices reflect the value of assets and the
right to collect rents. - Answer-True
T/F Three key trends identified in the text that will affect commercial real estate markets
are population growth, technology trends, and the changes anticipated in the ethnic
composition of the population. - Answer-True
CERTIFIED ANSWERS
A statement by a real estate investment trust that it invests only in apartment buildings
that are larger than 50 units and less than 10 years old is an example of an investment:
- Answer-D. Policy statement
The rent that can be obtained when leasing a property in an open and competitive
market is termed: - Answer-Market Rent
Income properties are purchased by investors who desire primarily to receive: - Answer-
A. periodic income and appreciation
You are considering purchasing a retail building for $5,000,000 (50,000 square feet of
net lease area). You expect to lease in the first year for $18 per square foot per year.
Vacancy and collection losses are expected to be 9 percent of PGI and operating
expenses 45 percent of EGI. What is the estimated net operating income (NOI) for the
first year? - Answer-C. 450,450
List the two economic principles that have a significant influence on the determination of
land uses within a metropolitan area - Answer-1. Transportation costs and the desire of
firms and individuals minimize such costs.
2. The ability to substitute intensive capital improvements for land availability ( eg high-
rise construction versus suburban office parks)
, Perfectly competitive asset markets include all of the following characteristics, except: -
Answer-D. highly regulated
A market in which investors do not use information about previous transactions and
other publicly available information is termed a : - Answer-A. Inefficient market
Early economists argued that good access creates value because it results in: -
Answer-B. Lower transportation costs
In determining where to locate, a firm considers the ability of the firm to substitute
building improvements for: - Answer-D. Land
In an urban area, the most desired locations are occupied by: - Answer-A. the most
productive use.
Transportation costs , and the price of land with as the distance to an
economic activity center of a city increases: - Answer-B. Increases, decreases
What type of rent is generally recognized as the best measure of the true cost of
occupied space? - Answer-C. effective. rent
As discussed in the text, the Q statistic is defined as: - Answer-D. property's market
value divided by its replacement cost.
T/F During the past decade in the United States and in many other developed nations,
the real estate asset market evolved into two markets: the traditional property market
and the securitized market. - Answer-True
T/F Deviations in transaction prices from the estimated market values supported by
market fundamentals are often referred to as 'noise'. - Answer-True
T/F A Q ratio greater than one indicates that the price of existing properties appear
cheap relative to their replacement cost. - Answer-False
T/F Expectations of variability are embedded in the discount rate, which in turn affect
asset prices. - Answer-True
T/F A speculative bubble exists when developers purchase large tracts of land
surrounding an area in anticipation that growth will occur in that area. - Answer-False
T/F One explanation for the existence of boom-and-bust periods (cycles) in real estate
is that investors need substantial periods of time to accumulate and then to invest
funds. - Answer-False
T/F Rents reflect the price of space and sale prices reflect the value of assets and the
right to collect rents. - Answer-True
T/F Three key trends identified in the text that will affect commercial real estate markets
are population growth, technology trends, and the changes anticipated in the ethnic
composition of the population. - Answer-True
