Question 1

Which of the following might impact the density of housing in a land development project?

Accepted Answer

A)  The price paid for the land by the developer
B)  The terrain of the land
C)  The target market's preferences regarding density
D)  All of the above

Question 2

In most instances,a developer's repayment rate is set so that the development loan will be repaid at the exact point that 100% of total project revenue is realized

Accepted Answer

A) True 
 B)False

Question 3

The land development industry is best characterized by which of the following statements?

Accepted Answer

A)  The land development industry is dominated by relatively few national competitors
B)  The land development industry is highly fragmented,localized,and extremely competitive
C)  Land development and project development are synonymous
D)  The production technologies and market risks involved in land development are essentially the same as those in project development

Question 4

Option contracts are used to reserve a parcel of land so that it will not be sold to someone else,while the developer does preliminary analysis of the site

Accepted Answer

A) True 
 B)False  True

Question 5

A developer must sell all of the lots in a development project and repay the entire development loan before any of the new property owners can receive a clear title

Accepted Answer

A) True 
 B)False

Question 6

Generally,which of the following is FALSE regarding an option contract?

Accepted Answer

A)  An option contract allows the developer to perform a preliminary market study and feasibility analysis
B)  If the developer decides to purchase a property,the price of an option is applied towards the price of the property
C)  If the developer decides not to purchase the property,the landowner will refund any money paid for the option
D)  An option contract provides the developer with the assurance that a property will not be sold over the course of the option period

Question 7

An analysis of whether land can be purchased and developed profitably is known as:

Accepted Answer

A)  Financial analysis
B)  Feasibility study
C)  Turnkey study
D)  Project profitability

Question 8

The amount to be paid to the lender from each lot sale is included in the:

Accepted Answer

A)  Release schedule
B)  Development agreement
C)  Cost breakdowns
D)  Subcontracts

Question 9

A futures instrument,such as a T-bill,can be used to hedge a cash or a spot instrument such as the prime rate,where the two instruments are not perfectly correlated.What type of hedge is this referred to as?

Accepted Answer

A)  A perfect hedge
B)  A straight hedge
C)  A cross hedge
D)  None of the above C

Question 10

Lenders typically insist on a loan repayment rate that equal to the rate for which parcels are expected to sell

Accepted Answer

A) True 
 B)False

Question 11

Generally,which of the following is FALSE regarding interest rate risk management techniques?

Accepted Answer

A)  Borrowers can protect themselves from upward movements in interest rates by using interest rate caps
B)  Borrowers can protect themselves from upward movements in interest rates by using interest rate futures contracts
C)  Borrowers can benefit from downward movements in interest rates by using interest rate caps
D)  Borrowers can benefit from downward movements in interest rates by using interest rate futures contracts

Question 12

A feasibility study analyzes whether a tract can be purchased and developed profitably

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the MOST LIKELY sequence of events in the land development process?

Accepted Answer

A)  Inspect site,perform feasibility analysis,implement marketing program,purchase land and begin construction of improvements
B)  Inspect site,purchase land and begin construction of improvements,perform feasibility analysis,implement marketing program
C)  Inspect site,perform feasibility analysis,purchase land and begin construction of improvements,implement marketing program
D)  Purchase land,perform feasibility analysis,perform preliminary market study,begin construction of improvements,implement marketing program

Question 14

A transaction in which two firms trade individual financing advantages to produce more favorable borrowing terms for each is know as an:

Accepted Answer

A)  Interest rate swap
B)  Sequential short hedge
C)  Cross hedge
D)  All of the above

Question 15

Usually,a lender does not require a developer to submit a schedule of estimated cash flows prior to approving a land development loan

Accepted Answer

A) True 
 B)False

Question 16

Which of the following was NOT stated as contributing to the complication of estimating amount of interest carry?

Accepted Answer

A)  The loan is drawn and interest is calculated on drawn amount
B)  Revenue from each type of site varies
C)  The rate of repayment of a loan depends on when the parcel is sold
D)  Development loan interest rates are usually fixed while market rates fluctuate

Question 17

Consider the table above,which summarizes monthly construction draws and sales revenues.What is the percent of lot sales revenue that needs to be used to repay the loan?

Accepted Answer

A)  4.0%
B)  75.0%
C)  76.6%
D)  33.3%

Question 18

An option contract does not preclude the landowner from selling the property to someone else after the expiration date

Accepted Answer

A) True 
 B)False

Question 19

By using an option contract,a developer may profit from an appreciation in the property's value over the option period

Accepted Answer

A) True 
 B)False

Question 20

Consider the feasibility study shown in the table above.What is the return on total cost for the proposed project?

Accepted Answer

A)  15.0%
B)  17.6%
C)  21.4%
D)  150.0% A

Exam 17: Financing Land Development Projects Part Five Alternative Real Estate Financing and Investment Vehicles

Which of the following might impact the density of housing in a land development project?

Correct AnswerverifiedShow Answer

In most instances,a developer's repayment rate is set so that the development loan will be repaid at the exact point that 100% of total project revenue is realized

Correct AnswerverifiedShow Answer

The land development industry is best characterized by which of the following statements?

Correct AnswerverifiedShow Answer

Option contracts are used to reserve a parcel of land so that it will not be sold to someone else,while the developer does preliminary analysis of the site

Correct AnswerverifiedTrue

A developer must sell all of the lots in a development project and repay the entire development loan before any of the new property owners can receive a clear title

Correct AnswerverifiedShow Answer

Generally,which of the following is FALSE regarding an option contract?

Correct AnswerverifiedShow Answer

An analysis of whether land can be purchased and developed profitably is known as:

Correct AnswerverifiedShow Answer

The amount to be paid to the lender from each lot sale is included in the:

Correct AnswerverifiedShow Answer

A futures instrument,such as a T-bill,can be used to hedge a cash or a spot instrument such as the prime rate,where the two instruments are not perfectly correlated.What type of hedge is this referred to as?

Correct AnswerverifiedC

Lenders typically insist on a loan repayment rate that equal to the rate for which parcels are expected to sell

Correct AnswerverifiedShow Answer

Generally,which of the following is FALSE regarding interest rate risk management techniques?

Correct AnswerverifiedShow Answer

A feasibility study analyzes whether a tract can be purchased and developed profitably

Correct AnswerverifiedShow Answer

Which of the following is the MOST LIKELY sequence of events in the land development process?

Correct AnswerverifiedShow Answer

A transaction in which two firms trade individual financing advantages to produce more favorable borrowing terms for each is know as an:

Correct AnswerverifiedShow Answer

Usually,a lender does not require a developer to submit a schedule of estimated cash flows prior to approving a land development loan

Correct AnswerverifiedShow Answer

Which of the following was NOT stated as contributing to the complication of estimating amount of interest carry?

Correct AnswerverifiedShow Answer

Consider the table above,which summarizes monthly construction draws and sales revenues.What is the percent of lot sales revenue that needs to be used to repay the loan?

Correct AnswerverifiedShow Answer

An option contract does not preclude the landowner from selling the property to someone else after the expiration date

Correct AnswerverifiedShow Answer

By using an option contract,a developer may profit from an appreciation in the property's value over the option period

Correct AnswerverifiedShow Answer

Consider the feasibility study shown in the table above.What is the return on total cost for the proposed project?

Correct AnswerverifiedA

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C

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A