1. (TCO 8) Under which conditions would one be MOST LIKELY to see an interest rate swap?

2. (TCO 8) A lender requires a 1.20 debt coverage ratio as a minimum. If the net operating income of a property is $60,000, what is the maximum amount of debt service the lender would allow?

3. (TCO 8) A property is financed with a 75% loan at 11.5% over 25 years. The property produces an ATIRR on total investment of 8.34% based on a tax rate of 31%. What can be said about the leverage associated with the property?

4. (TCO 8) A property produces an 8.92% ATIRR on the total investment considering a tax rate of 28%. What is the maximum interest rate that could be paid on debt without causing the leverage to be negative?

5. (TCO 8) Which of the following is also referred to as a negative amortization loan?

6. (TCO 8) A lender requires a 1.20 debt coverage ratio as a minimum. If the net operating income of a property is $65,000, what annual amount of debt service would provide the required debt coverage ratio?

7. (TCO 8) Which of the following typically would NOT be used as a basis for a participation loan?

8. (TCO 8) Which of the following gives the lender an option to purchase a full or partial interest in the property at the end of some specified period of time?

9. (TCO 8) Consider risk-return characteristics of Investments A-D, given above. Which of the following statements is TRUE?

10. (TCO 8) Which of the following refers to the risk real estate investors face stemming from changes in general economic conditions?

11. (TCO 8) When sales exceed a breakpoint sales volume in a retail lease with percentage rent, the additional rent is referred to as ________.

12. (TCO 8) The renewal probability is assumed to be 60% for a particular lease with 12 months vacant if the lease is not renewed. The expected vacancy at the end of the lease is ________.

13. (TCO 8) Due diligence means that an investor will ____

14. (TCO 8) Consider an investment in which a developer plans to begin construction of a building one year if, at that point, rent levels make construction

15. (TCO 8) Consider an investment in which a developer plans to begin construction of a building one year if, at that point, rent levels make construction feasible and the building will cost

$1 million to construct. There is a 50% chance that NOI will be $160,000 and a 50 percent chance that NOI will be $80,000. Using the traditional approach, similar to the “highest and best use” approach, what would be the land value of the property today, assuming a cap rate of 10 percent (12% discount rate and an NOI growth rate of 2%)?