REAL 4000 UGA Questions and
Answers
What does the value of a property mortgage depend on
✓ ~~~ 1. Magnitude of expected cash flows
2. Timing of expected cash flows
3. Riskiness of expected cash flows
The possibility that the actual outcome will vary from what was expected when the
asset was purchased.
✓ ~~~ Risk
fixed amount of money paid or received at the end of every period
✓ ~~~ Ordinary annuity
future cash inflow or outflow occurring only once
✓ ~~~ lump sum payment
What are the four time Value of money operations
✓ ~~~ Compounding Operations
1. Future value of a lump sum
2. Future value of an annuity
Discounting Operation
1. Present value of a lump sum
2.Present value of an annuity
,What affects value
✓ ~~~ required yield
What is the highest degree of control you can have
✓ ~~~ Purchase price
loans for which the interest rate does not change over the life of the loan
✓ ~~~ Fixed rate
more common when rates in the market are not stable as they protect lender from
interest rate risk
✓ ~~~ adjustable rate
Why would you take an adjustable rate?
✓ ~~~ it allows the borrower to secure lower rates for the short term
Two elements of a mortgage loan
✓ ~~~ 1. The note
2. The mortgage
exact terms of financial obligation
1. Where financial terms are discussed
2. Interest rate
, 3.Fixed rate
4.Amortization
✓ ~~~ The Note
A pledge of property as a security for the note. Formal conveyance of rights to
disposition
✓ ~~~ The mortgage (DOT)
Various arrangements for fixed-rate loan
✓ ~~~ 1. Fully Amortized
2. Partially Amortized
3. Interest only
4. Negative Amortization
Fully amortized
✓ ~~~ Most Residential Consumer Real Estate Loans
Partially amortized
✓ ~~~ 1. Most commercial Real Estate loans
2. Term for amortization
3. Term to maturity (paid off before amortization term)
Interest only (NON AMORTIZING sometimes called a bullet loan)
Answers
What does the value of a property mortgage depend on
✓ ~~~ 1. Magnitude of expected cash flows
2. Timing of expected cash flows
3. Riskiness of expected cash flows
The possibility that the actual outcome will vary from what was expected when the
asset was purchased.
✓ ~~~ Risk
fixed amount of money paid or received at the end of every period
✓ ~~~ Ordinary annuity
future cash inflow or outflow occurring only once
✓ ~~~ lump sum payment
What are the four time Value of money operations
✓ ~~~ Compounding Operations
1. Future value of a lump sum
2. Future value of an annuity
Discounting Operation
1. Present value of a lump sum
2.Present value of an annuity
,What affects value
✓ ~~~ required yield
What is the highest degree of control you can have
✓ ~~~ Purchase price
loans for which the interest rate does not change over the life of the loan
✓ ~~~ Fixed rate
more common when rates in the market are not stable as they protect lender from
interest rate risk
✓ ~~~ adjustable rate
Why would you take an adjustable rate?
✓ ~~~ it allows the borrower to secure lower rates for the short term
Two elements of a mortgage loan
✓ ~~~ 1. The note
2. The mortgage
exact terms of financial obligation
1. Where financial terms are discussed
2. Interest rate
, 3.Fixed rate
4.Amortization
✓ ~~~ The Note
A pledge of property as a security for the note. Formal conveyance of rights to
disposition
✓ ~~~ The mortgage (DOT)
Various arrangements for fixed-rate loan
✓ ~~~ 1. Fully Amortized
2. Partially Amortized
3. Interest only
4. Negative Amortization
Fully amortized
✓ ~~~ Most Residential Consumer Real Estate Loans
Partially amortized
✓ ~~~ 1. Most commercial Real Estate loans
2. Term for amortization
3. Term to maturity (paid off before amortization term)
Interest only (NON AMORTIZING sometimes called a bullet loan)
