CFA Practice Question

There are 195 practice questions for this study session.

CFA Practice Question

When a capitalization rate is used to estimate the resale price, it is referred to as a:

A. terminal cap rate.
B. going-in cap rate.
C. resale cap rate.
Correct Answer: A

In theory, it should represent the typical rate that would be expected at the time the property is sold in the future to the next buyer.

It's usually said that no one is going to buy a building with a terminal cap rate that is lower than the going-in cap rate. This is because no one wants to buy something today that they cannot sell for a higher price in 10 years.

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