Real Estate

RE1101: Fundamentals of Real Estate Finance AY 2014/2015 Sem I Revision Notes

Coverage: ALL materials covered in the lectures and tutorials. This is an OPEN book exam. Financial calculators are allowed but laptops are not allowed.

Format of Final Exam 2 compulsory questions. The questions have both calculation and discussion questions.

Financial Markets, Financial Institutions, and Money • Understand the overall movement of flow of funds through the financial system. Who are the players and what are their respective functions? What are the key services provided by the financial system? • What is the basic structures of the financial markets and cite some examples of financial products found within those markets and how they influence the overall economic functions of the financial system.

Interest Factor in Financing • Understand the basic time-value-of-money calculations: present value, future value, present value annuity, future value annuity, sinking fund, effective yield, rate of return, internal rate of return, etc. • How do you calculate holding period returns. How do you calculate the arithmetic-average, geometric-average, and dollar-weighted returns? What are the differences amongst these various returns?

Interest Rates and Rates of Return • What are the different types of securities? How do you calculate the yield-to-maturity, current yield, rate of return, etc. • What are the factors that influence the risk structure of interest rates? • What are the theories that help to explain the three empirical facts of the yield curve?

Mortgages • Understand the overall movement of flow of funds within the mortgage market. Who are the players within the mortgage market and what are their respective functions? • What are the components of the mortgage interest rate? • Understand the basic mortgage calculations and terms: debt service, loan principal, loan interest, outstanding loan balance, loan-to-value ratio, payment-to-income ratio, etc. and their...