©THEBRIGHTSTARS 2024
REE4204 Exam Questions With Revised
Answers
Real estate finance - answer✔✔of institutions, markets, and instruments used to transfer money
and credit for the purpose of developing or acquiring real property
True - answer✔✔In general, inflation is a monetary phenomenon resulting from an increase in
money supply as opposed to resulting from an increase in general price levels.
True - answer✔✔According to the liquidity premium theory, investors are willing to pay a price
premium for securities with shorter maturities.
False - answer✔✔For most investments, cash flow and net profit can be used interchangeably in
asset valuation.
False - answer✔✔Commercial banks are overseen by the Office of Thrift Supervision.
True - answer✔✔Since finance is concerned with the valuation of assets, it must explicitly
consider the time value of money.
True - answer✔✔Real Estate investment Trusts (REITs) specialize in investing in real property
and mortgages on real property.
False - answer✔✔The secondary mortgage market is the market where second (junior)
mortgages are created.
False - answer✔✔Since the nominal interest rate can be observed in the market, a precise
measure of future inflation can be determined.
False - answer✔✔A yield curve shows the yields on bonds over time.
False - answer✔✔In today's mortgage market, due to the short-term nature of mortgages, most
real estate financing takes place in the money markets.
False - answer✔✔The benefit to the investor of the call provision in a callable bond increases as
the market interest rate falls further below the rate offered on the bond.
False - answer✔✔The market segmentation theory suggests that there is more than one market
for the same security.
, ©THEBRIGHTSTARS 2024
False - answer✔✔A downward sloping yield curve shows that, at this point in time, long-term
rates are higher than short-term rates.
True - answer✔✔The price of a bond, besides being determined by the market-required rate, also
moves inversely to this rate.
False
8% - answer✔✔Under the expectations theory, observed rates on current one-year and two-year
bonds of 4% and 6%, respectively, indicate that the one-year bond rate one year from now will
be between 4% and 6%.
True - answer✔✔Under the expectations theory, an upwards sloping yield curve means that
investors expect market rates to rise in the future.
False - answer✔✔The market segmentation theory by its nature dictates that short term rates
must always be less than long term rates.
True - answer✔✔Default risk is the risk that a bond issuer will be unable to repay the principal
and interest on the debt.
True - answer✔✔The yield observed on a riskless bond in a non-inflationary environment would
be the real rate of interest.
True - answer✔✔A primary market transaction always involves the original issuer of the
security.
False - answer✔✔The term "toxic mortgage debt" in the 2000s referred to mortgages on
properties
contaminated by hazardous waste.
True - answer✔✔In using the discounted cash flow model, the valuation of an asset depends on
the expected amount, timing, and risk associated with the project's cash flows.
False - answer✔✔Negative financial leverage occurs when the cost of debt is greater than the
equity yield on the investment.
True - answer✔✔The Federal National Mortgage Association was originally established in 1938
for the purpose of buying FHA mortgages.
False - answer✔✔The falling house prices in the mid-2000s generated greater equity positions
for those buyers who had recently purchased a home.
REE4204 Exam Questions With Revised
Answers
Real estate finance - answer✔✔of institutions, markets, and instruments used to transfer money
and credit for the purpose of developing or acquiring real property
True - answer✔✔In general, inflation is a monetary phenomenon resulting from an increase in
money supply as opposed to resulting from an increase in general price levels.
True - answer✔✔According to the liquidity premium theory, investors are willing to pay a price
premium for securities with shorter maturities.
False - answer✔✔For most investments, cash flow and net profit can be used interchangeably in
asset valuation.
False - answer✔✔Commercial banks are overseen by the Office of Thrift Supervision.
True - answer✔✔Since finance is concerned with the valuation of assets, it must explicitly
consider the time value of money.
True - answer✔✔Real Estate investment Trusts (REITs) specialize in investing in real property
and mortgages on real property.
False - answer✔✔The secondary mortgage market is the market where second (junior)
mortgages are created.
False - answer✔✔Since the nominal interest rate can be observed in the market, a precise
measure of future inflation can be determined.
False - answer✔✔A yield curve shows the yields on bonds over time.
False - answer✔✔In today's mortgage market, due to the short-term nature of mortgages, most
real estate financing takes place in the money markets.
False - answer✔✔The benefit to the investor of the call provision in a callable bond increases as
the market interest rate falls further below the rate offered on the bond.
False - answer✔✔The market segmentation theory suggests that there is more than one market
for the same security.
, ©THEBRIGHTSTARS 2024
False - answer✔✔A downward sloping yield curve shows that, at this point in time, long-term
rates are higher than short-term rates.
True - answer✔✔The price of a bond, besides being determined by the market-required rate, also
moves inversely to this rate.
False
8% - answer✔✔Under the expectations theory, observed rates on current one-year and two-year
bonds of 4% and 6%, respectively, indicate that the one-year bond rate one year from now will
be between 4% and 6%.
True - answer✔✔Under the expectations theory, an upwards sloping yield curve means that
investors expect market rates to rise in the future.
False - answer✔✔The market segmentation theory by its nature dictates that short term rates
must always be less than long term rates.
True - answer✔✔Default risk is the risk that a bond issuer will be unable to repay the principal
and interest on the debt.
True - answer✔✔The yield observed on a riskless bond in a non-inflationary environment would
be the real rate of interest.
True - answer✔✔A primary market transaction always involves the original issuer of the
security.
False - answer✔✔The term "toxic mortgage debt" in the 2000s referred to mortgages on
properties
contaminated by hazardous waste.
True - answer✔✔In using the discounted cash flow model, the valuation of an asset depends on
the expected amount, timing, and risk associated with the project's cash flows.
False - answer✔✔Negative financial leverage occurs when the cost of debt is greater than the
equity yield on the investment.
True - answer✔✔The Federal National Mortgage Association was originally established in 1938
for the purpose of buying FHA mortgages.
False - answer✔✔The falling house prices in the mid-2000s generated greater equity positions
for those buyers who had recently purchased a home.
