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REE 4204 Exam Questions With Revised
Answers
Why do interest rates matter? - answer✔✔you want to pay the lowest rate you can because
interest determines the payment you have.
How are interest rates determined? - answer✔✔real rate + inflation rate = interest rate
What are some risks in real estate? - answer✔✔default risk, interest rate risk, inflation risk
What is a yield curve? - answer✔✔relationship between interest rates on short term assets vs.
long term assets.
What is the market value? - answer✔✔the average price the market is willing to pay for that
asset
What is financial leverage and why do you care about it? - answer✔✔positive (favorable)
leverage increases your rate of return
What is a call option? - answer✔✔the ability to pay off the loan early
What is a put option? - answer✔✔allows the borrower to put the property in place of the debt
what is the function of an intermediary? - answer✔✔its a 3rd party (mortgage lender) that helps
argue a contract
What is an efficient market? - answer✔✔things being placed efficiently
What kind of market is the real estate market? - answer✔✔weak form efficiency
Why was there little need for mortgage lending in the colonial US? - answer✔✔people used to
build their own cabins and they claimed land and homesteaded
Why was financing needed for post-civil war expansion? - answer✔✔they would sell their farms
to move out west and they needed financing to buy a new farm
What was real estate like in 1920's? - answer✔✔a lot of real estate was built and financed, the
economy boomed
REE 4204 Exam Questions With Revised
Answers
Why do interest rates matter? - answer✔✔you want to pay the lowest rate you can because
interest determines the payment you have.
How are interest rates determined? - answer✔✔real rate + inflation rate = interest rate
What are some risks in real estate? - answer✔✔default risk, interest rate risk, inflation risk
What is a yield curve? - answer✔✔relationship between interest rates on short term assets vs.
long term assets.
What is the market value? - answer✔✔the average price the market is willing to pay for that
asset
What is financial leverage and why do you care about it? - answer✔✔positive (favorable)
leverage increases your rate of return
What is a call option? - answer✔✔the ability to pay off the loan early
What is a put option? - answer✔✔allows the borrower to put the property in place of the debt
what is the function of an intermediary? - answer✔✔its a 3rd party (mortgage lender) that helps
argue a contract
What is an efficient market? - answer✔✔things being placed efficiently
What kind of market is the real estate market? - answer✔✔weak form efficiency
Why was there little need for mortgage lending in the colonial US? - answer✔✔people used to
build their own cabins and they claimed land and homesteaded
Why was financing needed for post-civil war expansion? - answer✔✔they would sell their farms
to move out west and they needed financing to buy a new farm
What was real estate like in 1920's? - answer✔✔a lot of real estate was built and financed, the
economy boomed
