Essay on Fin 590 Week 8 Final Exam Answers

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Question 1. 1. (TCOs B, C) The difference between the rate of return on assets and the cost of borrowing is: (Points : 5) financial leverage spread debt service none of the above

Question 2. 2. (TCO A) The investment decision process: (Points : 5) is fundamentally the same for real estate investment analysis as for other investment areas requires the investor to adjust expected cash flows for timing differences and risk
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7. (TCO D) Which is a key difference between tenancy in common and joint tenancy? (Points : 5) Tenancy in common carries right of survivorship.
Joint tenancy interests must be equal and undivided.
Tenancy in common interests must be equal but need not be undivided.
Joint tenancy interests are taxed as an association.

Question 8. 8. (TCO E) Two mutually exclusive projects are available for an investment of $4,900 each. Project S will generate cash flows of $6,000 per year for two years. Project L will generate cash flows of $2,400 per year for six years. At an opportunity cost of capital of 6%, which project will yield the highest net present value? (Points : 5) Project S
Project L
The net present values are equal
Cannot be solved with the information provided

Question 9. 9. (TCO G) In contemporary risk analysis: (Points : 5) risk is defined as the measurable likelihood of variance from the most probable outcome no attempt is made to quantify risk the terms risk and uncertainty are used synonymously investors are viewed as being risk-neutral


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