Tuesday, February 15, 2011

Questions for chapters 1-5

Chapter 1


1) The ownership of real estate includes the existence of legally recognized and flexible rights.

False- transferable rights

2) Leases and sales are the two most common real estate conversions


3) A crude measure of market efficiency is therefore the time required for newly available information to be reflected in product sales.


4) The more inefficient a market is, the less opportunity market participants, both buyers and sellers, have of making extraordinary profits

False- Efficient

5) Successor entrepreneur can be large and sophisticated real estate funds, or single-persons operations.


6) Developers borrow money to create space, successor entrepreneurs borrow money to purchase

a) Create a greater amount of space

b) Controlling interests in existing space

c) Foreclosed homes

d) Building materials for construction

7) While efficient markets tend to move relatively homogenous products, real estate markets are characterized by

a) Product heterogeneity

b) Placement heterogeneity

c) Superior heterogeneity

d) Stratified heterogeneity

8) Some of the most important information to know when considering investments are actual

a) Sales transactions

b) Sequential bidding

c) Recent transaction prices

d) Consuming activity

Chapter 2


1) Finance is concerned with postponing consumption to invest in the hopes of future return.


2) Scientists aim to describe knowledge, while an engineer aims to prescribe thinking.


3) Real estate prescription requires clear goals to direct its efforts but does not require a uniform approach to research.


4) To be useful and therefore relevant, prescription must be grounded in prediction.


5) None of the descriptive disciplines are focused on the work of science.

False-all of the descriptive disciplines

6) The following disciplines fall under the umbrella of the social sciences except for

a) Sociology

b) Anthropology

c) Real estate

d) Communications

7) The following are all a part of the framework for the Academic Discipline of real estate

a) Derivative

b) Efficiency

c) Subprime market

d) None of the above

8) Who developed a system of beliefs shared by the members of a given research community

a) Theodore Khan

b) Simon Frank

c) Thomas Kuhn

d) Tom Swartz

Chapter 3


1) The human processing system consists of heuristic behavior and bias.

False- short and long term

2) George and Avery discovered several types of cognitive heuristics that humans tend to use in problem solving.

False-Kahneman and Tversky

3) Although heuristic behavior is an efficient means of information processing, mental short cuts can lead to systematic errors.


4) A subjective gut feeling is a substitute for an objective solution


5) The real estate industry is a prime example of a complicated task environment


6) Humans develop simplifying cognitive shortcuts because of

a) Limited amount of storage in short term memory

b) Semantic and recognition memory

c) Human information problem solving

d) Gut feeling

7) Daniel Kahneman split the 2002 Nobel Prize in economic sciences with

a) Simon Rose

b) Vernon L. Smith

c) Thomas Evertt

d) Vince Lama

8) What article in the Science journal is one of the most cited publications in the social sciences

a) Social Research by Andrew Hansz

b) Behavioral research by Julian Diaz

c) 1974 article by Tversky and Kahneman

d) None of the above

Chapter 4


1) Urban economics is the study of farmland location.

False-study of urban areas, including urban spatial structure and the location of households and firms

2) The central business district is the unique downtown area of an industrial based city

False-central location for commerce in an urban environment and the focal point of the urban growth models

3) The key to a local economy is the health and prospects, present and future, of the economic base.


4) A classic example of an industry of typical basic employment is a bagel shop.


5) The sector (or octagon) growth model was developed by Homer Hoyt.


6) The following are all urban growth models except for

a) Sector growth model

b) Circular expansion model

c) Multiple nuclei concept

d) Axial growth model

7) Ernest Burgess studied cities in what years during his development of the concentric circle growth model

a) 1950s

b) 1930s

c) 1920s

d) 1970s

8) A land value gradient is made up of

a) Thunen rings

b) Hypothetical agrarian area

c) Bid-rent curves

d) None of the above

Chapter 5


1) Type of income stream characterized by equal periodic payments over its life is considered to be a lump sum.


2) Cash flows from typical real estate investments are not annuities.


3) Two standard cash flow statements exist for real estate investments, the annual cash flow statement and the terminal year statement.


4) The potential gross income is the total amount of income that a property could generate if fully occupied for an entire 30 years.

False- an entire year

5) Debt service represents the amount of money necessary each year to service property damages.

False-to service property debt

6) The three concepts of time value of money are

a) Discounting annuities

b) Compounding annuities

c) Compounding lump sum present values

d) All of the above

7) The most common real estate annuity is

a) Fixed rate mortgage

b) FAC mortgage

c) Annual amortization mortgage

d) None of the above

8) BTER stands for

a) Better than ever rate

b) Before the effective rate

c) Before tax equity reversion

d) None of the above

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