Understanding Capitalization Rules
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Questions and Answers

Capitalization is the process used to:

  • Establish reproduction cost
  • Establish mortgage payments
  • Establish a depreciation schedule
  • Convert income into an estimate of value (correct)
  • A loan secured by real property featuring an interest rate that is constant for the term of the loan is referred to as a(an):

  • Adjustable-rate mortgage
  • Fixed-rate mortgage (correct)
  • Constant amortization mortgage
  • Non-adjustable-rate mortgage
  • The underlying principle providing the basis of the income capitalization approach is:

  • Change
  • Balance
  • Conformity
  • Anticipation (correct)
  • The basic equation used in the income approach to value is:

    <p>Income ÷ Rate = Value</p> Signup and view all the answers

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