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Hbc2301:Project Management Question Paper
Hbc2301:Project Management
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2013
QUESTION ONE – 30 MARKS
(a) Define the term real estate. (2Marks)
(b) Explain the main types of real estates (5Marks)
(c) Define and briefly explain the main types of real estate investment trusts (REITS) (3Marks)
(d) Real Estate Investments Ltd is a company incorporated in Kenya dealing with development of real estate. The company issued shs. 100 million per value, 16%, 10 year bond five year ago. The bond was issued at 2% discount and issuing costs amounted to shs. 2 million.
The interest rates in the market have declined and refinancing possibility is being considered. A new shs. 100 million par value, 12%, five year bond can be issued by the company. Issue costs and discounts on issue will be 5% and 3% of the par value respectively. The discount is meant to attract investors.
The old bond can be redeemed at 10% premium and in addition, 2 months interest penalty will have to be paid on redemption. The corporation tax rate is 40% and the after tax cost of debt is 7%.
Required: Advice the company whether it is worthwhile to replace the existing bond (20Marks)
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QUESTION TWO – 20 MARKS
Write explanatory notes on the following as used in real estate financing:
(i) Foreclosure (ii) Mortgage securitization (iii) Real Estate Syndication (iv) Leveraged Lease (v) Financial Leverage (vi) Types of mortgage backed bonds (MBBs)
QUESTION THREE – 20 MARKS
(a) Explain five job opportunities available in the real estate industry (10Marks)
(b) An investor has shs. 700,000 and wants to invest at 8.5% interest rate with 30 year maturity period and a monthly payment. It is further agreed that the rate is subject to adjustment at the end of the year. The adjustment rate is 0.25% per annum.
Required: What are the monthly payments for first, second and third month? (10Marks)
QUESTION FOUR – 20 MARKS
(a) Describe five primary mortgage market makers in the real estate industry. (10Marks)
(b) A borrower is able to repay a proposed mortgage of shs. 100,000 per annum for three years. The rate of interest is 10%.
Required: How much will you be willing to loan to the borrower. (5Marks)
(c) An apartment block has gross income of shs. 120,000. The cost of this block is five times the gross income.
Required: Estimate the value of this property. (5Marks)
QUESTION FIVE – 20 MARKS
(a) Explain the main principles of property valuation (12Marks) (b) Differentiate between a buy-down mortgage and a junior mortgage (4Marks) (c) List four rights of a mortgage. (4Marks)
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