Final Exam - REE 6935 – Spring 2021 – Dr. Beracha To complete this final examination you will need to answer the 11 questions listed below. All questions must to be answered in Excel using the associated tabs included in the “Final exam - REE6935 – Spring 21-Excel” file that is provided to you. This final exam is due on or before March 2nd at 11:55 p.m. EST. By that time you should submit an electronic copy (via email) of your assignment. If you turn your assignment late, 10% will be deducted from your grade for every calendar-day delay. All the work on this final exam must be 100% your own work. You are not allowed to discuss the exam with any of your classmates or any other person prior to the deadline. A failing grade in the course will automatically be assigned to a student that helps or seeks help from another person while working on the exam. You are allowed, however, to use the textbook, classroom notes, review lectures and use any “non- interactive” websites while working on the exam. 1. (12 points) Calculate the requested values and include your answers in their respective cells highlighted in yellow. 2. (10 points) Recall the data we discussed in class that distinguishes between the land value and the structure value associated with real estate properties in different cities around the US. a) Which type of cities are likely to experience higher price volatility? Cities with high ratio or low ratio of land to total property value? Briefly explain why. b) What other important factor affects the real estate price volatility in some locations more than others? Briefly explain. 3. (9 points) You have recently invested in an office building located in NYC at a cost of $50 million. You paid for 40% of the building in cash and financed 60% with an interest only loan. For a variety of reasons you decided to denominate the loan in British pounds. At the time of the loan origination $1 could buy 0.81 British pounds. If you have a clause within your loan stating that your loan-to-value must never exceed 70%, what conversion rate will trigger a default? For simplicity, assume that the value of your property in dollars does not change. 4. (10 points) Consider the Excel/@Risk analysis on a hypothetical income producing property shown below. The only input risk distribution defined in this analysis is the “Terminal CAP”, which is assumed to have a normal distribution with a mean of 5.25% and a standard deviation of 1%. The distribution shown below is the IRR output distribution. a. According to this analysis, what is the probability that you will earn a positive nominal return on your investment? b. According to this analysis, what is the probability that you will earn a return that is equal or higher than your required return? c. Given today’s real estate and interest rate market environments, what is the problem with defining a “Terminal CAP” with a ...

1. Final Exam - REE 6935 – Spring 2021 – Dr. Beracha
To complete this final examination you will need to answer the
11 questions listed below.
All questions must to be answered in Excel using the associated
tabs included in the “Final
exam - REE6935 – Spring 21-Excel” file that is provided to
you.
This final exam is due on or before March 2nd at 11:55 p.m.
EST. By that time you should
submit an electronic copy (via email) of your assignment. If you
turn your assignment late,
10% will be deducted from your grade for every calendar-day
delay.
All the work on this final exam must be 100% your own work.
You are not allowed
to discuss the exam with any of your classmates or any other
person prior to the
deadline. A failing grade in the course will automatically be
assigned to a student that

2. helps or seeks help from another person while working on the
exam. You are allowed,
however, to use the textbook, classroom notes, review lectures
and use any “non-
interactive” websites while working on the exam.
1. (12 points) Calculate the requested values and include your
answers in their
respective cells highlighted in yellow.
2. (10 points) Recall the data we discussed in class that
distinguishes between the land
value and the structure value associated with real estate
properties in different cities
around the US.
a) Which type of cities are likely to experience higher price
volatility? Cities with
high ratio or low ratio of land to total property value? Briefly
explain why.
b) What other important factor affects the real estate price
volatility in some
locations more than others? Briefly explain.
3. (9 points) You have recently invested in an office building
located in NYC at a cost
of $50 million. You paid for 40% of the building in cash and
financed 60% with an

3. interest only loan. For a variety of reasons you decided to
denominate the loan in
British pounds. At the time of the loan origination $1 could buy
0.81 British pounds.
If you have a clause within your loan stating that your loan-to-
value must never
exceed 70%, what conversion rate will trigger a default? For
simplicity, assume
that the value of your property in dollars does not change.
4. (10 points) Consider the Excel/@Risk analysis on a
hypothetical income producing
property shown below. The only input risk distribution defined
in this analysis is
the “Terminal CAP”, which is assumed to have a normal
distribution with a mean
of 5.25% and a standard deviation of 1%. The distribution

4. shown below is the IRR
output distribution.
a. According to this analysis, what is the probability that you
will earn a positive
nominal return on your investment?
b. According to this analysis, what is the probability that you
will earn a return
that is equal or higher than your required return?
c. Given today’s real estate and interest rate market
environments, what is the
problem with defining a “Terminal CAP” with a normal
distribution? Suggest
a different kind of distribution that might be more suitable and
explain how this
distribution is likely to affect your IRR output compared with a
normal
distribution. Will it increase the chance that you will earn your
required rate of
return?

5. 5. (10 points) In order to diversify their portfolio, real estate
investors should have
exposure to different real estate property types, classes and
geographic locations.
a. Is it more difficult to hold a diversified direct real estate
investment portfolio
compared to a diversified stock portfolio? Why?
b. What is a common alternative to holding a direct real estate
investment portfolio
that provides investors diversification with ease?
c. What type of risk is eliminated with diversification? What
type of risk remains?
d. Is the benefit of diversification when applied to real estate
smaller or larger than
the benefit of diversification when applied to a stock portfolio?
Briefly explain.
6. (8 points) Consider the following information about 5
different asset classes (A, B,
C, D and E).
A B C D E
Expected Return 12% 8% 10% 9% 13%
Standard deviation 21% 14% 19% 14% 23%

6. Correlation matrix:
A B C D E
A 1.00
B 0.20 1.00
C 0.70 -0.30 1.00
D 0.05 0.45 0.20 1.00
E 0.90 0.50 0.78 -0.05 1.00
Assume that you currently hold asset A in your portfolio.
a. If you must choose only one additional asset to include in
your portfolio, which
one would you choose in order to maximize your overall
portfolio expected
return?
b. If you must choose only one additional asset to include in
your portfolio, which
one would you choose in order to minimize your overall
portfolio risk?
c. If you were to add asset C to become 50% of the value of
your portfolio, what
can you say about the standard deviation of your overall
portfolio? Hint - It

7. must be lower or higher than a specific value.
d. If you were to add asset C to become 40% of the value of
your portfolio, what
would be the expected return on your overall portfolio?
7. (9 points) Consider the REIT valuation spreadsheet presented
in class. For each of
the following scenarios, and all other things equal, determine
whether each scenario
will increase, decrease or won’t affect the probability that new
investors will
achieve their levered required rate of return.
a. The price of the REIT is lower.
b. A distribution is defined for NOI growth rate, where the
average value remains
the same, but the right “tail” of the distribution is longer than
the left “tail”.
c. The projected 10-year treasury rate is higher.
d. The quality adjustment value is lower.

8. e. The risk premium is lower.
f. The current market cap is higher.
g. The required levered return is higher.
8. (9 points) Consider the Big Mac index and its price
differential among countries.
a. Which factors contribute the most to the price differentials
and which factors
are pushing toward price equilibrium?
b. Compare real estate to a Big Mac with respect to the factors
you mentioned in
part a. Would you expect a larger or smaller price differential in
the price of
real estate among countries compared with the Big Mac price
differential?
Why?
9. (8 points) You have gained access to a dataset that includes
commercial real estate
transaction that took place during the 2017-2019 time period in
Miami, FL and in
San Francisco, CA. After general data “clean up” you ran the
following regression:
����� = � + �1���� + �2���� + �3����� +
�4��������

9. Where:
- Price is the price in dollars paid for each property transacted.
- SQFT is the size of each property transacted in squared feet.
- Year takes a value of 0, 1 or 2 if the transaction took place
during the year 2017,
2018 or 2019, respectively.
- Class takes a value of 0, 1 or 2 if the transacted property is of
class A, B or C,
respectively.
- DumMiami is a dummy variable that takes a value of 1 if the
property transacted
is locate in Miami and 0 otherwise.
For each of the coefficients ((�1, �2, �3 and �4) please
predict whether you expect
it to be positive, negative or ambiguous and explain in one
sentence.
10. (9 points) Referring to problem 9, what other variables
would you have liked to
include in your regression if you could get any information you
want about each
property?

10. a. List 3 additional variables you would have liked to include in
your regression
in order to improve its accuracy and clearly explain how each
variable would
be defined (like I did in in question 9)
b. Briefly explain the sign you would expect (negative, positive
or ambiguous)
from the coefficient of each of these variables.
11. (6 points) Which single real estate topic covered in this
course you found to be most
and least interesting and/or relevant? Please explain why in 3-4
sentences.
Deliverables:
Via email ([email protected]): ONE Excel file named
“FirstName_LastName_6935”.
mailto:[email protected]
This is a graded discussion: 50 points possible
due Mar 7
Week 1: National Practice Problem Exploration
11 unread reply.11 reply.

11. Evidence translation begins with the identification of a problem
or concern. Reflect upon the eight national practice problems
presented in the Global Burden of Disease Research. Select one
of the practice problems to address the following.
· From a global/nationwide perspective, how does the selected
practice problem impact nurses, nursing care, healthcare
organizations, and the quality of care being provided?
· Identify the national level key stakeholders who are affected
by the practice problem and stakeholders involved in resolution.
· Are clinical practice guidelines used to address this problem?
Why or why not? If used, provide a brief overview of the CPG.
If a CPG is not used, propose an interventio n that could be
implemented on a national scale to address the problem.
Please review the Graduate Discussion Grading Guidelines and
Rubric (Links to an external site.)for complete discussion
requirements.
P1YearQQuartely return - CRE_Atlanta_GAQuarterly return -
CRE_Denver_COQuarterly return - CRE_USAInflation
index19774100.00197813.24%2.58%2.90%102.09a. Correlation
between Altalnta and Denver for the 1990:1-2016:1 time
period21.76%2.25%3.07%104.9931.54%8.50%3.39%107.0943.9
8%9.50%5.89%109.02b. Correlation between Denver and the
USA for the 1978:1- 2016:1 time
period197912.75%4.09%3.81%112.4023.33%1.82%4.32%116.4
332.76%2.23%4.75%120.13c. Correlation between USA and
inflation rate for the 1995:1 - 2016:1 time
period48.68%6.97%6.19%123.51198012.15%5.00%5.54%128.9
923.27%2.77%2.36%133.17d. The annual standard deviation of
returns for the USA for the 1990:1-2016:1 time
period32.17%2.21%3.79%135.2746.82%9.43%5.32%138.97198

12. 112.21%6.71%2.96%142.51e. The annual standard deviation of
returns for the USA for a 4-year holding period for the 1990:1-
2016:1 time
period23.13%2.63%4.23%145.8930.63%0.59%3.21%150.0845.6
1%27.87%5.29%151.37f. The geometric average USA annual
returns for the 1990:1-2016:1 time
period198212.43%1.73%2.49%152.1723.30%0.40%2.07%156.2
032.48%2.69%1.52%157.6542.97%0.91%3.04%157.17198311.7
4%1.89%1.75%157.6523.25%1.47%2.54%160.2334.52%2.06%2
.96%162.1644.30%4.10%5.31%163.12198412.99%2.24%3.35%
165.2224.14%3.78%3.16%166.9932.56%0.45%2.46%169.0843.
48%0.99%4.21%169.57198514.30%-
0.95%2.08%171.3423.53%1.89%2.60%173.2731.58%1.31%2.39
%174.4044.11%4.31%3.73%176.01198612.90%0.46%2.03%175
.2022.49%1.49%1.96%176.3332.82%-
1.50%1.50%177.4640.97%-
1.94%2.57%177.94198711.35%1.28%1.83%180.5220.71%-
1.81%1.19%182.7730.27%0.24%2.09%185.1940.74%-
1.11%2.67%185.83198811.22%0.63%1.84%187.6021.39%-
0.43%2.00%190.0230.30%0.68%2.39%192.9141.39%2.11%3.07
%194.04198912.29%0.56%1.75%196.942-
0.24%0.78%2.00%199.8430.55%1.68%2.05%201.2940.76%-
3.46%1.75%203.06199011.90%0.34%1.38%207.2520.25%1.28
%1.52%209.183-2.18%-0.10%0.84%213.694-1.87%-3.34%-
1.43%215.4619911-2.23%-2.10%0.05%217.3920.70%-
0.51%0.01%219.003-1.05%-0.31%-0.33%220.934-6.05%-
4.34%-5.33%222.06199210.41%-0.83%-0.03%224.322-
0.79%0.34%-1.03%225.7630.20%-1.24%-0.44%227.5440.13%-
1.65%-2.81%228.50199311.84%1.79%0.77%231.2422.34%-
8.31%-0.24%232.5332.06%1.84%1.10%233.6642.84%1.66%-
0.25%234.78199411.98%1.98%1.31%237.0423.74%3.35%1.54
%238.3333.69%2.77%1.51%240.5844.15%4.96%1.88%241.061
99513.39%2.43%2.11%243.8023.31%2.06%2.08%245.5732.85
%2.53%2.06%246.7043.09%-
1.15%1.09%247.18199612.57%2.33%2.40%250.7223.04%3.06
%2.29%252.3332.39%2.48%2.63%254.1144.58%2.74%2.61%25

13. 5.39199712.46%2.80%2.34%257.6522.72%2.68%2.82%258.133
3.65%2.75%3.38%259.5845.35%3.63%4.71%259.74199812.36
%5.43%4.14%261.1923.73%6.67%4.19%262.4833.06%3.30%3.
46%263.4542.55%3.15%3.55%263.93199912.58%3.03%2.59%2
65.7022.05%3.12%2.62%267.6332.64%3.71%2.81%270.3742.3
7%2.55%2.89%271.01200012.12%4.09%2.40%275.6822.39%3.
78%3.05%277.6231.99%1.84%2.94%279.7142.35%2.72%3.33%
280.19200112.24%2.05%2.36%283.7422.00%1.84%2.47%286.6
331.53%0.75%1.60%287.1240.02%0.32%0.67%284.54200211.3
6%2.34%1.51%287.9221.18%1.10%1.61%289.6931.02%-
0.07%1.79%291.4740.30%0.35%1.67%291.30200310.81%1.12
%1.88%296.6221.39%0.93%2.09%295.8130.87%2.64%1.97%29
8.2341.61%1.16%2.76%296.78200412.27%1.13%2.56%301.772
2.00%1.39%3.13%305.4832.73%3.61%3.42%305.8043.78%2.07
%4.66%306.44200512.47%4.47%3.51%311.2724.05%4.24%5.3
4%313.2034.10%4.78%4.44%320.1344.76%3.85%5.43%316.91
200613.07%3.00%3.62%321.7424.06%4.06%4.01%326.7333.54
%3.10%3.51%326.7343.10%3.85%4.51%324.96200712.59%3.3
3%3.62%330.6823.18%5.01%4.59%335.5131.95%2.63%3.56%3
35.7341.82%3.47%3.21%338.22200811.63%1.20%1.60%343.85
20.36%1.80%0.56%352.363-0.37%0.22%-0.17%352.314-7.03%-
6.04%-8.29%338.5320091-7.43%-7.60%-7.33%342.532-5.30%-
4.56%-5.20%347.333-3.05%-2.75%-3.32%347.784-2.81%-
1.68%-
2.11%347.74201010.95%1.04%0.76%350.4522.29%3.69%3.31
%350.9933.24%4.18%3.86%351.7542.76%6.35%4.62%352.952
01112.79%3.59%3.36%359.8523.20%3.67%3.94%363.4832.80
%3.48%3.30%365.3643.01%3.85%2.96%363.40201212.26%2.8
7%2.59%369.3923.25%3.68%2.68%369.5332.14%2.88%2.34%3
72.6441.97%3.49%2.54%369.73201312.28%2.76%2.57%374.84
22.40%3.85%2.87%376.0132.68%3.35%2.59%377.0543.22%4.2
2%2.53%375.28201412.47%2.97%2.74%380.5023.57%3.44%2.
91%383.8133.06%3.56%2.63%383.3144.22%4.06%3.04%378.1
2201514.16%3.28%3.57%380.2323.63%3.94%3.14%384.2933.7
2%3.75%3.09%383.1744.08%3.83%2.91%380.88201612.30%2.
49%2.21%385.29

14. P2a.b.
P3Answer:$1 would buyBritish poundsShow your work:
P4a.b. c.
P5a. b.c.d.
P6a.b.c.d.
P7For parts a through g type "Increase", "Decrease" or "No
effect"a.b.c.d.e.f.g.
P8a.b.
P9
P10a.b.
P11