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Homework 3

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First Name

Student ID Number

  1. In the Bockl approach, entrepreneurial leverage results from:
    (Check all that apply)
    a. Borrowing at a higher interest than the property is earning
    b. Borrowing at a lower interest than the property is earning
    c.  Using other people's money
    d.  Debt amortization
    e.  Economic cycles
  2. Assumptions and problems with the "popular" approaches to investment analysis include:
    (Check all that apply)
    a.  Based on win/loose negotiations
    b.  Assumes an expanding local economy
    c.  Based upon the "bigger fool" theory
    d.  Ignores risk
    e.  Based upon "get rich quick" schemes
  3. Given the following information, what is the indicated overall rate using the Ellwood formulation?

    Loan to value

    0.8

    Mortgage Interest

    7.5

    Term

    30

    Payments per year

    12

    Equity Yield Rate

    11

    Holding Period

    7

    Appreciation/Depr.

    16.00%

    (Check all that apply)
    a.  .0824
    b.  .0661
    c.  .0656
    d.  .0653
    e.  .0592

  4. Given the following information, what is the indicated overall rate using the Ellwood formulation?

    Loan to value

    0.75

    Mortgage Interest

    10

    Term

    30

    Payments per year

    12

    Equity Yield Rate

    11

    Holding Period

    8

    Appreciation/Depr.

    14.00%

    (Check all that apply)
    a.  .0881
    b.  .0904
    c.  .0906
    d.  .0907
    e.  .1024

  5. Which of the following approaches use a stabized net operating income?
    (Check all that apply)
    a.  Investment value
    b.  Single period equity valuation
    c.  Discounted cash flow
    d.  Ellwood
    e.  Harldson

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