©THEBRIGHTSTARS 2024
REE 4204 Sirmans Exam Questions With
Revised 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 without the use of
intermediaries
, ©THEBRIGHTSTARS 2024
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
REE 4204 Sirmans Exam Questions With
Revised 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 without the use of
intermediaries
, ©THEBRIGHTSTARS 2024
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
