A. Chapter 15 discusses problems with the overall capitalization technique when

Question

A. Chapter 15 discusses problems with the overall capitalization technique when there is likely to be a discontinuity in the rate of change in a property’s operating results. What are some examples of when such a discontinuity might be encountered?

B. What effect, if any, might an increase in the rate of return prospects in the stock or bond markets have on market-derived real estate capitalization rates?

C. Can you think of circumstances that might cause a property’s market value to decline faster than the reduction in the remaining balance of a fully amortizing mortgage?

Explanation / Answer

A. In a mortgage the foreclosure can happen and the borrower may default on paying principle and interest. This happened during the year 2nd through 5th and it reduces by the time, by the end of tenth year it reaches at very low point.

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