Which of the following statements about interest rates according to the material covered in the lecture are TRUE:

1. A comparison rate includes expected interest expenses, upfront fees and ongoing fees on a $150,000 loan over a 25 year loan term.
2. If variable interest rates are expected to increase in the future, choosing a fixed-interest rate for a new home loan will normally reduce your interest expenses compared to choosing a variable interest rate on a new home loan.

You would like to buy a car which will cost $9,000 including registration and insurance. You have not saved any money and so will need to borrow the entire amount as a personal loan. The interest rate on the loan is 0.6% per month (compounded monthly). You plan to pay off the loan in monthly instalments over 8 years with the first loan payment to take place in exactly one month. As such, the personal loan payments can be calculated using the same method used in the course material. Calculate your monthly loan repayments (to the nearest dollar). Please do not include dollar signs or commas in your answer.

You would like to buy an apartment and can afford loan repayments of $4,000 per month with the first payment to be made in exactly one month. The loan will be an ordinary principal and interest style home loan with a loan term of 24 years. The interest rate is 0.3% per month (compounded monthly). How much are you able to borrow today to buy your apartment (to the nearest dollar)? Please do not include dollar signs or commas in your answer.

David is buying a property for $800,000 including any fees and stamp duties. He is borrowing $600,000 at an effective interest rate of 4% per annum. In the first year the return on assets for the property is 10%. Using a similar approach to the one used under the ‘Financial Leverage’ section of the lecture, calculate his return on equity in the first year as a percentage (to the nearest percentage point).

Which of the following statements about the process of buying a property in Sydney according to the material covered in the lecture are TRUE:

1. You have the option to use a solicitor or conveyancer to handle the conveyancing process between exchange of contracts and settlement. A solicitor is normally more expensive than a conveyancer but may be better if an unusual situation arises.
2. When you buy a home jointly with any person under joint tenancy, you can direct who will receive your share of the property in the event of your death.

How much would Susan be willing to pay for an investment property today if she believes it will generate $30,000 per year in rent indefinitely (after deducting agent fees and other costs), growing at 1% above inflation if he can achieve a real rate of return on similar investments of 6% per annum using the ‘Present value of future rent’ valuation approach (to the nearest dollar)?

Which of the following statements about ‘Property Taxes’ (in NSW) and ‘Property Strategies’ according to the material covered in the lecture are TRUE:

1. An individual buys an investment property for $1 million that consists of a house built on 550 square meters of land. Land tax is normally payable on the difference between the market value of the property ($1 million in this case) less the relevant land tax free threshold.
2. Lenders Mortgage Insurance is a fee payable if you borrow more than 80% of the value of a property. The insurance will pay your loan payments on your behalf if you temporarily lose your job or have an accident or illness that prevents you from working.

Which of the following statements about ‘Property Taxes’ (in NSW) and ‘Property Strategies’ according to the material covered in the lecture are TRUE:

1. Your main residence is usually exempt from capital gains tax (on the increase in price) if it has been your main residence for the entire period, is on land of 2 hectares or less, has not been used to produce assessable income and you are not a foreign resident.
2. Under the ‘6 year rule’, it is possible under some circumstances for someone to still declare a property to be their ‘main dwelling’ even though they are living somewhere else under some circumstances.

Which of the following statements about ‘The Good, The Bad and the Ugly’ and ‘Financial Leverage’ sections of the lecture material are TRUE:

1. The rent v buy debate is essentially a comparison between the wealth created from renting your entire life and also regularly saving and investing versus the alternative of borrowing to buy a home and living in that home for most of your life.
2. The rent v buy debate indicates that buying a home is more likely to create more wealth than renting for your entire life.

Which of the following statements about ‘The Good, The Bad and the Ugly’ section of the lecture materials are TRUE:

1. One of the problems of property is that there can be a risk of a sharp fall in property prices due to the bursting of a property bubble and an associated recession. If you lose your job in the recession and are forced to sell your home after the decrease in prices, it can wipe out your equity.
2. Some of the good things about buying a home include the control over long-term dwelling expenses and that financial leverage can magnify your return on equity if the return on the asset exceeds the interest rate on any associated loan. Some of the bad things about property include poor liquidity, high ‘fees’ and lost flexibility.