Practice Test Section 5 - Mod 13-15

Question 1

Thompson paid an annual property tax this year of $2,940. If the mill rate is 28, and the assessed ratio is 60 percent of market value, what market value did the
assessor assign to the Thompson property?

A. $157,500
B. $175,000
C. $262,500
D. none of the above

Answer 1

B. $175,000

$2,940 / 0.028 = $105,000 / 0.60 = $175,000

Question 2

Which of the following is NOT a money market instrument?

A. certificates of deposit
B. Eurodollars
C. stocks
D. treasury bills

Answer 2

C. stocks

Question 3

Fannie Mae, Freddie Mac, and Ginnie Mae participate in a market known as the

A. equity market.
B. money market.
C. primary market.
D. secondary market.

Answer 3

D. secondary market.

Question 4

Walton purchased a property six months ago for $200,000. Properties have been
appreciating at a rate of 10% per year. What is Walton’s property likely to be worth
today based on this rate of appreciation?
A. $180,000
B. $210,000
C. $220,000
D. $222,222

Answer 4

B. $210,000

$200,000 × 1.05 (5% is used for six months) = $210,000

Question 5

The entity that carries out the nation’s monetary policy is called the

A. FDIC.
B. Federal Reserve.
C. Office of the Comptroller of the Currency.
D. U.S. Treasury.

Answer 5

B. Federal Reserve.

Question 6

The Bremer property was initially overpriced and sat on the market for an extended period before it sold 15% below the market at $153,000. What should the Bremer
property have sold for if it had been not been overpriced?
A. $130,000
B. $175,950
C. $180,000
D. $191,250

Answer 6

C. $180,000

$153,000 / 0.85 = $180,000

Question 7

A purchaser applied for a 70% mortgage, and the seller agreed to pay 4 points on the mortgage. If the seller paid $5,600 in points, what was the selling price?
A. $114,286
B. $140,000
C. $200,000
D. $238,000

Answer 7

C. $200,000

$5,600 / 0.04 = $140,000 / 0.70 = 200,000

Question 8

What entity guarantees mortgages?

A. Department of Housing and Urban Development (HUD)
B. Fannie Mae
C. Federal Housing Administration (FHA)
D. Department of Veterans Affairs (VA)

Answer 8

D. Department of Veterans Affairs (VA)

Question 9

The median price of $5,000 per tillable acre declined 15% in the last year due to an economic downturn. What is the current median price?

A. $4,250
B. $4,347
C. $5,750
D. $5,882

Answer 9

A. $4,250

$5,000 × 0.85 = $4,250 current median price

Question 10

A property has taxes of $3,200 and a market value of $200,000. What is the
effective tax rate?
A. 1.6%
B. 2.0%
C. 10.5%
D. 62.5%

Answer 10

A. 1.6%

$3,200 / $200,000 = 0.016 (or 1.6% effective tax rate)