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Fnce: 424:Real Estate Finance And Investment March Question Paper

Fnce: 424:Real Estate Finance And Investment March

Course:Bachelor Of Commerce

Institution: Kabarak University question papers

Exam Year:2010

KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2009/2010 ACADEMIC YEAR

FOR THE DEGREE OF BACHELOR OF
COMMERCE

COURSE CODE: FNCE: 424

INSTRUCTIONS:
1. Answer questions ONE and any other TWO questions.
2. Write your registration number clearly, Be neat, brief and show all the workings.

QUESTION 1 (30 marks)
(i) Discuss the process of Real Estate Industry from feudalism era to the current heavy investment
industry. (4 marks)
(ii) Discuss the process that can be triggered by a defaulting mortgagor and ends with
foreclosure. (6 marks)

(iii) As a financial expert operating in the real estate industry, do you agree with the general
justification of the property management in a contemporary real estate business? Support your
answer. (10 marks)
(iv) Despite the acute shortage of affordable housing units in Kenya, accessing mortgage finance is a
challenge to many. In regard to the above statement discuss any three informal approaches to
mitigating this concern. (6 marks)
(v) Use the following data to illustrate the effect of a situation where a lender made a mortgage loan
of 50,000 KES at a 9 % interest rate with 25 year maturity and monthly payments of 420 KES.
After 5 years, the market rate was 12 percents and lender would like the borrower to repay the
loan. Estimate the least discount that the lender might be willing to give to the borrower and
estimate the percentage of the discount.(4 marks)

QUESTION 2 (20 marks)
(i) Assume that an investor has Ksh.500,000 and wants to invest this amount in an annual variable –
rate- payment mortgage at 8.5 percent original interest rate, with a 30 years term and monthly
payments. In the contract, the interest rate is meant to be adjusted at the end of each year and rate
increases at 0.25% per year. Estimate the monthly payments for the first, second and the third
years of the loan. (10 marks)
(ii) Discuss the phase “real estate syndication,” and justify its presence in the real
estate industry. (10 marks)

QUESTION 3 (20 marks)
(i) Give a survey of the Kenya Mortgage Finance Industry. (10 marks)
(ii) In regards to question 3(i) above, describe the trend of the Kenya Mortgage Finance Institutions
(KMFI) to date. (10 marks)

QUESTION 4
(i) Discuss the role of any 5 primary Mortgage Market makers in the real
estate industry. (10 marks)
(ii) Discuss the following financing methods as applied in every dynamic real estate industry::
(a) Growing Equity Mortgage (G.E.Ms)
(b) Reverse Annuity Mortgage (R.A.Ms). (10 marks)

QUESTION 5 (20 marks)
i) Discuss 3 main approaches used to determine the fair market value of areal estate
property. (10 marks)
ii) Despite the fact that most of the Kenya population lives in temporally structures, it is
still difficult for the low and middle income earners to access the mortgage finance
facilities in the market. Describe any five factors that could have led
to this exclusion. (10 marks)

Fnce: 424:Real Estate Finance And Investment March Question Paper

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