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- What types of risk does the BORROWER (or OWNER) face when taking a commercial real estate loan? What is the potential benefit?
- What is meant by positive financial leverage? What about negative financial leverage?
- What drives the spread between 10-year commercial mortgage rates and the 10-year Treasury yield seen in Exhibit 16-2?
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- What are some of the major differences between loans for residential and commercial real estate? What types of risk does the LENDER face in making commercial real estate loans? What potential benefits does the lender receive? What types of risk does the BORROWER (or OWNER) face when taking a commercial real estate loan? What is the potential benefit? What is meant by positive financial leverage? What about negative financial leverage? What drives the spread between 10-year commercial mortgage rates and the 10-year Treasury yield seen in Exhibit 16-2?How might a sudden decrease in people's expectations of future real estate prices affect interest rates? O A. Interest rates would increase because real estate would have a relatively lower rate of return compared to bonds, which would cause the demand for bonds to increase. B. Interest rates would increase because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. OC. Interest rates would decrease because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. O D. Interest rates would decrease because real estate would have a relatively lower rate of return compared to bonds, which would cause the demand for bonds to increase.Which of the following is the principal risk faced by a home equity lender? a. Interest rates in the economy may fall b.Home prices in the area may decline c.Interest rates in the economy may rise d.Home prices in the area may rise
- Assume you’re an investor and you expect interest rate to rise in the near future, how would this affect your investment decision in the short and in the long term. Assume you’re a potential borrower and you anticipate that interest rate will decline in the near future. How will affect your borrowing decision in the short term as well as in the long term.8. How do rising interest rates affect the size of real estate loans that lenders will advance?Again, be specific.What is the break-even mortgage interest rate (BEIR) in the context of financial leverage? Would you ever expect an investor to pay a break-even interest rate when financing a property? Why or why not?
- Which of the two main participants involved in real estate finance are seeking to maximize risk adjusted return on surplus income for themselves or others, along with low risk and high return projects? borrowers mortgagers lenders (mortgagers Please do fast ASAP fastWhat is a risk premium? Why does such a premium exist between interest rates on mortgages and rates of return earned on equity invested in real estate?What is the advantage of a variable-interest loan? Protects the borrower from rising interest rates Borrower can capitalize on a reference rate decrease Makes it easier for the borrower to plan for future payments Reduces the total interest payments Which of the following tools is used to analyze the industry attractiveness in the credit application process? PESTEL analysis Management analysis Ratios analysis SWOT analysis
- What aspect of FHA loans made them particularly attractive to investment companies such as life insurance companies? Group of answer choices a. The increased loan-to-value ratios. b. The reduced default risk. c. The higher interest rates. d The shorter loan terms.Explain why the return associated with an investment includes both the income paid by the issuer and the change in value associated with the investment. Suppose interest rates on residential mortgages of equal risk were 8 percent in California and 10 percent in New York. a.Could this differential persist? What forces might tend to equalize rates? b.Would differentials in borrowing costs for businesses of equal risk located in California and New York be more or less likely to exist than differentials in residential mortgage rates? Would differentials in the cost of money for California and New York firms be more likely to exist if the firms being compared were very large or very small? c. What are the implications of the trend for financial institutions to become large mega banking organizations and to engage in nationwide branching? Which fluctuate more, short-term or long-term interest rates? Why? Suppose a new process was developed that could be used to make oil out of seawater. The…What risks might commercial banks face if they use short-term deposits from savers to pay for long-term loans, like mortgages, that often have fixed interest rates? What could the financial institution do to lower these risks?