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California Real Estate Exam

Category - California

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An appraiser is preparing the income approach to an appraisal of income property. In his selection of a capitalization rate, he must recognize that the higher the rate used, the greater the implied ______________?

Income
Appreciation
Risk
Value

Explanation

Answer: C - The capitalization rate indicates the return that the owner expects on the purchase price. The greater risk involved in the investment, the greater the capitalization rate.

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