Q&A Hero

Q: __________ occurs when a country abolishes its own currency and adopts the currency of some other country. a. Demonetization b. Dollarization c. A currency swap d. A currency board

Q: In addition to their mortgage, Fred and Wilma must also pay property taxes of $5,000 per year (tax deductible) and insurance of $2,000 per year. Property upkeep costs $300 per month on average. What are the average monthly pre and after tax costs of homeownership during year two?

Q: Which of the following statements is correct about the SDR? a. The SDR is a fixed exchange rate system created by the IMF. b. The SDR was designed to replace the U.S. dollar. c. The SDR is the most popular trading currency among traders. d. The SDR is used as international reserve assets between central banks.

Q: Amount of Tax Deduction Fred and Wilma have just bought a nice new home on Rockaway Beach on January 1st. They financed their home with a $100,000 15 year 5% mortgage. This will be the second year of their mortgage. How much interest will they pay to their bank? Assuming their marginal tax rate is 35% what is their after tax interest rate?

Q: If Citi in New York has a buy rate of $0.0127 per yen and Sumitomo Bank in Tokyo has a buy rate of $0.0157 per yen, an arbitrager could profit by buying yen in Tokyo and simultaneously sell them in New York.

Q: Which are the key metric used to determine a buyers ability to afford a home purchase? I) monthly gross income II) real estate taxes III) Insurance costs IV) Available down payment V) outstanding credit card debt VI) current interest rates VII) price of the home VIII) student loans a) I, IV, VI, VII b)I, II, III, IV, VI, VII c) all except VIII d) all of the above

Q: Assume that the exchange rate is currently at $0.85 per Swiss franc and that U.S. importers start to like Swiss chocolates more than they did in the past. If the Swiss Central Bank wants to keep the Swiss franc fixed at $0.85 per Swiss franc, it will have to intervene by buying up Swiss Francs and selling dollars.

Q: Which of the following does not provide liquidity to the housing market? a) RMBS b) Ginnie Mae c) S & Ls d) DINC

Q: If the Japanese yen was worth $.005 six months ago and is now worth $.007 today, the yen has appreciated by 40%.

Q: The goal of an arbitrage transaction between two currencies is to profit on difference in exchange rates in different markets by taking some risks of exchange rate movements.

Q: Maximum Purchase Price In New York City a young couple should expect to spend 40% of income on housing. David makes $25,000 per year as an opera singer and Penny $60,000 as a teacher. property taxes and condo fees, total $1,000 per month. Mortgage rates on 30 year fixed rate loans are at 4%. The couples parents will gift them the required 10% down payment. What can the couple spend on their condo?

Q: Approximately how many housing units are there in the United States as of the 2010 census? a) 50.000,000 b) 131,000,000 c) 250,000,000 d) 308,000,000

Q: Bid price is the price at which a bank is ready to buy a foreign currency and ask price is the price at which a bank is ready to sell a foreign currency.

Q: Which of the following is not a qualified construction cost for Low Income Tax Credit? a) foundation b) roof c) land acquisition d) plumbing

Q: The Citibank trading desk quotes a buy rate of 1.25 and a sell rate of 2.00 for the dollar/euro exchange rate (S$/). How much euros would you receive, if you sell $1,000 to Citibank? a. 500 euros b. 800 euros c. 1,250 euros d. 2,000 euros

Q: $/Pound SFr/$ SFr/Pound New York 00 1.00 - London 2.00 - 3.00 Geneva - 1.00 3.00 Suppose that you are an arbitrageur that starts with $100 in New York. How much arbitrage profit can you make? a. $0 b. $50 c. $100 d. $150

Q: Which of the following apartment types is typically constructed on high cost land? a) Low-Rise b) Garden c) Mid-rise d) High-rise

Q: $/Pound SFr/$ SFr/Pound New York 00 1.00 - London 2.00 - 3.00 Geneva - 1.00 3.00 Suppose that you are an arbitrageur that starts with $100 in New York. Which of the following paths is correct in order to make arbitrage profit? a. Buy pound in New York → sell pound for SFr in New York → sell SFr for dollar in New York. b. Buy SFr in New York → sell SFr for pound in New York → sell pound for dollar in New York. c. Buy SFr in New York → sell SFr for pound in Geneva → sell pound for dollar in New York. d. Buy pound in New York → sell pound for SFr in London → sell SFr for dollar in New York.

Q: Local governments believe that having attractive housing options for new residents encourages business to locate operations in their region. What are the costs and considerations faced by developers and local governments when considering the creation of new housing units?

Q: What were the key historical events that shaped the current residential mortgage market?

Q: Use the graph below to answer questions 9 12. Figure 1.1 Refer to Figure 1.1. Suppose that the market for British pound is initially in equilibrium at point A with the exchange rate $2.00 per pound. Then the demand curve shifts to D2. If the British central bank wants to fix the exchange rate at $2.00/pound, they have to: a. buy pound and sell dollar by the amount of Q3 Q1. b. sell pound and buy dollar by the amount of Q3 Q1. c. sell only pound by the amount of Q3 Q1 and leave dollar alone. d. buy only pound by the amount of Q3 Q1 and leave dollar alone.

Q: Do you believe that the government has a role in encouraging home ownership? What are some of the ways in which the US government seeks to make homeownership more affordable?

Q: Figure 1.1Refer to Figure 1.1. Suppose that the market for British pound is initially in equilibrium at point A with the exchange rate $2.00 per pound. Then the demand curve shifts to D2. If the British central bank wants to fix the exchange rate at $2.00/pound, there will be ________ of pound and the pound is __________.a. excess supply; overvaluedb. excess supply; undervaluedc. excess demand; overvaluedd. excess demand; undervalued

Q: Figure 1.1Refer to Figure 1.1. Suppose that the market for British pound is initially in equilibrium at point A with the exchange rate $2.00 per pound. When the demand curve shifts to D2, the pound ___________ and the quantities of pound traded in the market __________.a. appreciates; increasesb. appreciates; decreasesc. depreciates; increasesd. depreciates, decreases

Q: Which of the following does not represent government support of home ownership? a)LIHTC b)Section 8 c)FHA Mortgage Guarantee d)Mortgage interest deductibility

Q: When you look at the pro forma interest carry for a land development loan, you must estimate all of these except: a) Amount of draws b) Depreciation c) Timing of draws d) Projected interest rates

Q: Provisions protecting lenders during development include all of the following except: a) Conversion b) Completion Bonds c) Title insurance d) Holdbacks

Q: An American tourist is planning to visit Mexico. The exchange rate at which the tourist can buy pesos in a retail bank is the ________. a. bid price. b. ask price. c. flat rate. d. cross rate.

Q: From 2000 to 2010, the yen/dollar exchange rate fell from 240 yen/dollar to 102 yen/dollar, while the dollar/pound exchange rate fell from 2.22 dollar/pound to 1.62 dollar/pound. As a result, a. the dollar appreciated relative to the yen, but depreciated relative to the pound. b. the dollar depreciated relative to the yen, but appreciated relative to the pound. c. the dollar appreciated relative to both the yen and the pound. d. the dollar depreciated relative to both the yen and the pound.

Q: Common land financing mechanisms include all of these except: a) Purchase for cash b) Down payment plus subordinated seller financing c) Long-term debt d) Down payment plus loan for a percentage of land value

Q: Put the stages of the land development process in the proper order: a) Contact Broker, Option, Development, Sales b) Contact Broker, Development, Option, Sales c) Development, Contact Broker, Sales, Option d) Option, Contact Broker, Sales, Development

Q: Given a system of floating exchange rates, assume that Boeing Inc. of the United States places a large order, payable in euros, with a German contractor for jet engine parts. The immediate effect of this transaction will be a shift in the: a. supply curve of euros to the left which causes the dollar to appreciate against the euro. b. supply curve of euros to the right which causes the dollar to depreciate against the euro. c. demand curve for euros to the left which causes the dollar to appreciate against the euro d. demand curve for euros to the right which causes the dollar to depreciate against the euro

Q: Feasibility analysis determines whether a project is currently feasible given: a) Prevailing market rents b) Existing land prices c) Financing costs d) All of the above

Q: Which of the following will shift the demand curve for the Japanese yen to the right in a trade flow model? a. There is a large increase in Japanese demand for U.S. exports as U.S. culture become more popular in Japan. b. U.S. consumers no longer want to buy Japanese products after the Toyota lawsuit, leading Americans to question the quality of Japanese products. c. Political uncertainties in Asia lead U.S. investors to shift their financial investment out of Japan, back to the United States. d. U.S. demand for products imported from Japan increases significantly as Japanese culture becomes more popular in the U.S.

Q: Assume that Bank of America quotes you a buy rate of $1.95 per pound and a sell rate of $1.98 per pound. If you buy 1,000 pounds from Bank of America, the bank will have too few pounds. To square off, Bank of America has to ________ the buy rate and ______ the sell rate. a. raise; raise b. raise; lower c. lower; raise d. lower; lower

Q: Which category of development costs is least likely to be funded by a construction lender? a) Interest carry cost b) Hard costs c) Land acquisition d) Soft costs

Q: Which of the following are typical contingencies prior to obtaining a permanent loan commitment? a) Exculpation b) Lease-up c) Approved design changes d) Completion by date certain

Q: Assume that Citibank quotes you a buy rate of $1.95 per pound and a sell rate of $1.98 per pound. How much will you pay in dollars, if you buy 1,000 pound from Citibank? a. $505.05 b. $512.82 c. $1,950 d. $1,980

Q: Assume that the current buy rate for the Japanese yen is 87.4100 (yen per dollar) and the current sell rate is 87.4400 yen per dollar. Assume that a bank buys and sells $1,000,000 in the yen market. How much would the bank collect as a spread in terms of yen? a. 30,000 yen b. -30,000 yen c. -343.09 yen d. 343.21 yen

Q: Stages of a development project include sale (S), completion and occupancy (C&O), management (M), construction (C), and land acquisition (LA). Place these in the correct sequence. a) C, C&O, M, S, LA b) LA, C&O, M, S, C c) C, LA, C&O, S, M d) LA, C, C&O, M, S

Q: Which is not a type of development financing? a) FAR b) Construction loan c) Take-out loan d) Mini-perm

Q: A trader at a U.S. bank believes that the euro will strengthen substantially in exchange rate value during the next hour. Thus, she buys large amount of euro now and wait for the value of the euro to rise so that she can sell it later. This action is called: a. arbitrage, because it is a risk-free activity. b. arbitrage, because it is a risky activity. c. speculation, because it is a risk-free activity. d. speculation, because it is a risky activity.

Q: In which order does a development transaction progress? a) site selection, entitlement, construction, tenant fit out b) entitlement, site selection, construction, tenant fit out c) site selection, entitlement, tenant fit out, construction d) site selection, tenant fit out, entitlement, construction

Q: Other things equal, if American exports to Japan are higher than American imports from Japan, then, under a floating exchange rate system, we would expect the dollar to appreciate against the yen.

Q: Put the following stages of the development process in the correct order A. Entitlement B. Site-work C. Pre development D. Pre-leasing E. Shell construction F. Tenant build-out G. Pad delivery I. C, A, D, B, F, E, G II. D, C, A, B, E, F, G III. A, D, C, B, G, E, F IV C, A, D, B, G, E, F

Q: In the trade flow model, U.S. imports of goods and services will create a supply of U.S. dollars and foreign imports of U.S. goods and services will create a demand for U.S. dollars.

Q: If U.S dollar depreciates against foreign currency, the U.S. exports will become relatively more expensive to foreigners and the trade deficit will get worsen.

Q: Second Bank comes in with a $180 m 7 year floating rate loan proposition with a 20 year amortization schedule. The 7 year treasury is currently 3.0%. The swap premium to fix the loan is 1.0%. The loan spread is 250 basis points. Second Bank believes the property should have a 7.5% cap rate. Contrast this loan to the First Bank offer in Exercise 4 by calculating LTV, Debt Service and first year Debt Service Coverage (based on NOI) for each loan.

Q: Mutual of Atlanta, a large insurance company that buys properties for its real estate investment account, comes forth with an unsolicited bid for the property at $300 million. They can close in 90 days. Analyze the implications of their offer.

Q: Suppose that the current buy rate for the Japanese yen is 87.410 (yen/dollar) and the current sell rate is 87.440 yen per dollar. If a bank buys and sells $1,000,000 in the yen market, it will make 30,000 yen from a spread.

Q: A joint venture partner comes approaches who offers $25m for a 40% share of the equity. The partner is a pension fund and would like a convertible preferred stock that pays a 6% dividend and converts into a 40% ownership interest at the end of a seven year hold period.

Q: If First American Bank quotes bid and offer rates for the Russian ruble at $.0350-.0360, the bank would realize profits of $1,000 on the purchase and sale of 1 million rubles.

Q: 8) The site for the Cobble Creek development was priced at $40,000,000. In addition to an outright sale, the prior land owner originally offered a number of financing alternatives: a) an unsubordinated ground lease at $4,000,000 per year b) a subordinated ground lease at $6,000,000, per year c) contribution of the site into the JV for a 50% equity interest d) a three year option at $1,000,000 per year Prepare an economic analysis and state the pros and cons of each offer.

Q: Exchange rates are 150 yen per dollar, 0.8 euro per dollar, and 20 pesos per dollar. A bottle of beer in New York costs 6 dollars, 1,200 yen in Tokyo, 7 euro in Munich, and 100 pesos in Cancun. Where is the most expensive beer? a. Tokyo b. Munich c. New York d. Cancun

Q: At the end of the project the developers believe the property should be valued using a 6% cap rate on the $20m NOI, without adjustment. How much do they believe the property is worth. What is the value of the developers equity after repaying the construction loan and all accrued interest.

Q: ________ is the rate at which banks sell a currency and ________is the rate at which banks buy the currency. a. Bid; offer b. Offer; bid c. Spread; offer d. Closing; spot

Q: ___________ is the effect on exchange rates when traders alter quotes to maintain a balance between amounts of currency bought and sold to square off at the end of a day. a. Inventory control effect b. Inside information effect c. Order flow effect d. Asymmetric information effect

Q: First Bank has proposed a 10 year 6% fixed rate permanent loan at $160m with a 25 year amortization schedule. The ten year treasury bond is currently 3.5%. First Bank believes that this is a 55%LTV loan. At what cap rate are they valuing the property?

Q: The project is expected to show NOI of $20m in its first year of operation. The property will be managed by a third party management firm for $500,000. Calculate the expected first year ROA.

Q: Suppose Sumitomo Bank quotes the /$ exchange rate as 110.30.50 and Nomura Bank quotes 110.50.70. In this case, a. there is no arbitrage opportunity. b. you can make money by buying dollars at Sumitomo Bank and selling dollars at Nomura. c. you can make money by buying dollars at Nomura Bank and selling dollars at Sumitomo. d. You can make money by buying dollars at Sumitomo Bank and selling yens at Nomura Bank.

Q: The Center at Cobble Creek is a mixed use project with apartments, office and a retail center. The cost of construction was $200 million, before interest. Cobble Creek was originally financed with $60 million of equity and a construction loan for $140m. The construction period was eight quarters in length. The construction draws at $20 m each were made at the end of the second through eighth quarters. Interest accrued on all draws at 10%, compounded quarterly. Prepare a draw schedule showing interest and principal.

Q: When foreign countries buy potatoes grown in the United States, they are generating a: a. demand for U.S. dollars and a demand for a foreign currency. b. demand for U.S. dollars and a supply of a foreign currency. c. supply of U.S. dollars and a demand for a foreign currency. d. supply of U.S. dollars and a supply of a foreign currency.

Q: In foreign exchange trading, arbitrage activity could lead to ________. a. risky trading transactions b. either gain or loss on the trade. c. only gain on the trade. d. (a) and (b) are correct.

Q: What are the risks of using a land lease as a financing vehicle? Can these risks be mitigated? If so, how? If not, why not?

Q: Assume the following circumstances in Review Exercise number 8. You have $10 m of capital available to pursue this project. Predevelopment costs excluding land are expected to be $5 million. There is a 40% chance the project will progress to construction. The bank will not lend unless you have control of the land

Q: In foreign exchange trading, arbitrage has ______ risk and speculation has ________ risk. a. zero; zero b. positive; positive c. zero; positive d. positive; zero

Q: Which of the following is not typically used as a mortgage covenant? a) Debt Service Coverage b) Quick ratio c) Loan to Value Ratio d) Interest Coverage

Q: One dollar is worth 80, and one Thai baht is worth 2.5. How many Thai baht do you need to buy a dollar? a. 0.03125 baht b. 0.005 baht c. 32 baht d. 200 baht

Q: One of the following was not a result of the financial crisis: a) Interest-only loans b) Increased amortization c) Higher credit spreads d) Lower LTV limits

Q: Which of the following is not a possible bid/ask quotation for the Thai baht? a. $.50/$.51 b. $.49/$.50 c. $.52/$.51 d. All of the above are possible bid/ask quotations

Q: Negative leverage exists when: a) ROA > Cap Rate b) ROA > Cost of Debt c) ROA > Cost of Equity d) ROA < Cost of Debt

Q: When the value of the dollar changes from 0.75 pounds to 0.5 pounds, then the pound has a. appreciated against the dollar by 33.3%. b. depreciated against the dollar by 33.3%. c. appreciated against the dollar by 50.0%. d. depreciated against the dollar by 50.0%.

Q: When the exchange rate for the Mexican peso changes from 8 pesos to the dollar to 10 pesos to the dollar, then a. the peso has appreciated against the dollar by 20%. b. the peso has appreciated against the dollar by 20%. c. the peso has appreciated against the dollar by 25%. d. the peso has depreciated against the dollar by 25%.

Q: If LTV increases and debt service coverage decreases what is the impact on the cost of debt? a) decreases b) remains the same c) increases d) no impact

Q: Increasing the amount of leverage applied has what impact on the risk associated with a property investment? a) decreases b) remains the same c) increases d) no impact

Q: The biggest player in the foreign exchange market are: a. tourists b. import/export firms c. drug dealers d. financial institutions such as banks

Q: Place these claims in order of seniority: I. First Mortgage II. Common Equity III. Mezz Debt IV. Preferred Equity a) I,II,III,IV b) IV, II, III, I c) I, III. IV, II d) III, I, IV, II

Q: Which of the following currencies has the highest trading volume each day? a. U.S. dollar b. Euro c. Yen d. British pound

Q: You believe your property is reaching peak cash flow potential. You can sell an equity joint venture interest to a pension fund or increase the amount of the first mortgage outstanding. What are the implications of each of these choices? You read an article in the local paper about a new development that threatens the market dominance of your property. Does this change your choice of financing?

Q: Which of the following countries has the highest daily trading volume of foreign exchange market? a. The U.S. b. The U.K c. Japan d. Hong Kong