- CFA Exams
- CFA Exam: Level II 2021
- Study Session 15. Alternative Investments
- Reading 39. Private Real Estate Investments
- Subject 4. The income valuation approach
CFA Practice Question
A small office building that recently sold for $175,000 generates annual net operating income of $21,000. What is the implied capitalization rate for this property?
B. 10.8%
C. 12.0%
A. 8.7%
B. 10.8%
C. 12.0%
Correct Answer: C
The implied capitalization rate is NOI/Price = $21,000/$175,000 = 12%.
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