The Going-In Capitalization Rate Can Vary Significantly by Property Quality

question 24

Multiple Choice

The going-in capitalization rate can vary significantly by property quality.Which of the following classes of properties within a particular property type would be expected to have the highest cap rates?

• A)Class A properties
• B)Class B properties
• C)Class C properties
• D)Cap rates would be equal across all classes within the same property type

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Definitions:

Coupon Paying Treasuries

U.S. Treasury securities that offer periodic interest payments until maturity, at which point the face value is repaid to the holder.

Principal

The outstanding balance on a loan.

Yield To Maturity

The expected total yield on a bond, assuming it is kept until maturity, encompassing all the interest earnings plus the return of the principal.

Forward Rate

The agreed-upon price for a financial transaction to be executed at a future date, used particularly in currency and interest rate markets.