Question

true or false. explain.

10. Leveraged IRRs always have higher appreciation in the value of the property always have higher returns as the investor benefits from greater relative) 11. In a level payment or self-liquidating pal of the debt. payment or self-liquidating mortgage, the final payments cover mainly the prind 12. The 'income capitalization approa e income capitalization approach to estimate the value of a property compares its value with recently sold properties with similar characteristics.

Answer 1

• 10 False. Leveraged IRR's always have higher retushs but Not because investor benelits from ogreater appreciation in the value of the property but because in leveraged IRR's invests uses borrowed money to increase return on the investment IF the retushis on the total value invested in the security C Capital plus borrowed amount) is greates than the interest then investor can Significant returns. True Because in self liquidating mostgage, every month we pay the installment which includes the interest due on the loan and a part of principal. Next month, since we one less amount, the pay less interest on that and more money goes to the principal. Similarly in the last month ol in the last installment, the amount mainly covers the principal and a very less part of interest because aftes that the loan we one has been completely paid and therefore No interest owe to us for the loan

. Folse, Because in income capitalization approach, we calculate the value of the property by Capitalizaing its ? Net operating in come by the rate ie Market Value = Net operohing in come capitalization sate and therefore we would not compare its value with recently sold propesties With similas characteristics.