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Real Estate Finance: Chapter 18 Test
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Flashcards
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Chapter 18 Test
Terms in this set (15)
any item that is prorated is shown on the settlement statement
as a debit to one party and a credit to the other party for the same amount
if interest gets compounded more often than once a year, which of the following is true?
the effective rate would be a bit higher than the nominal rate
in a real estate investment project, what are salaries for managers or bookkeepers classified as
variable costs
which of the following statements is true regarding simple interest?
the formula for calculating simple interest is principal times rate times time
which figures do you need to calculate monthly mortgage payments
loan amount, length of loan, and the Interest Rate
what is the ratio of pre-tax net income to the money invested known as?
return on investment
what process is used to estimate the potential profitability of a real estate investment?
break-even analysis
what is the total amount of interest accrued on Jill's $5,000 savings account on deposit for 3 years at 4 percent interest compounded annually?
$5,000 (1 +.04)
3 (exponent 3)= $5,000 (1.04)
3
next multiply 1.04 threetimes=
1.04×1.04×1.04= 1.1249
then= $5,000 × 1.1249= 5,624
5624-5000= 624
seller Jim's real estate tax liability is $6,788.00 per year. If Jim sells his property on June 30, how much does he owe the buyer for the taxes?
6,788÷12=565.666 per month
565.666 × 6 (the months the seller lived there Jan-June)=$3,394
which is the formula for computing simple interest?
interest =principal × rate × time
what are points that are designed to raise the effective interest rate of the loan known as?
discount points
Jim and Bill obtain a mortgage for $90,000 for 30 years at a fixed rate of 5.75 percent. Their monthly payment is $525.22. How much of their first mortgage payment goes toward the principal?
90,000 × .0575= 5175 yearly interest due
5175 ÷ 12= 431.25 first month's interest
525.22 -431.25=93.97 first month's principal
which of the following is another term for effective interest rate?
yield
what percentage do conventional loans typically require the income ratio to be under?
28%
what is the document that the lender calculates to show the borrower the amount of the loan that is to be paid monthly?
amortization schedule
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