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CHAPTER 2 VALUE AND REAL ESTATE DECISIONS Test Problems 1. Which of these is the best example of an investment decision, based on the criteria identified in the chapter? c. Decision whether or not to purchase a high definition television or stay with a conventional TV at $500 lower cost. 2. A portfolio perspective of real estate value, as described in this chapter, involves considering the value of real estate in relation to: c. Your own particular context and your other assets. 3. The effect of selecting a residence upon such matters as lifestyle and relations with others outside the household are described as: c. Nonmonetary costs or benefits. 4. Of these real estate investments, the riskiest is e. Raw land. 5. Of these real estate investments, the one with the greatest cost uncertainty is a: c. Subdivision development with permits not yet granted. 6. As the level of perceived risk increases, d. Values decrease and expected returns increase. 7. The most liquid form of real estate is: d. Standard single-family residences. 8. The type of real estate that tends to have the highest cash flow uncertainty is: e. Hotels and motels. 9. Which of these strategies in real estate investment would tend to increase risk? d. Invest for a short term (short holding period). 10. Which of these is the correct statement about the relationship of investment analysis and appraisal? a. Investment analysis estimates value to a specific investor while appraisal estimates value to the typical investor. 2-1
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Study Questions 1. Buying a home is not about return on investment. It is about family or household security, opportunity, and other irreplaceable intangibles. As a person who understands the meaning of investment, how would you answer this assertion?
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