Property Valuation
The capitalization rate (cap rate) reflects:
AThe percentage of a loan that is paid off each year
BThe rate of return an investor expects from an income-producing property✓ Correct
CThe ratio of property taxes to assessed value
DThe annual appreciation rate of the property
Explanation
The cap rate is the rate of return (yield) an investor expects from a property, expressed as NOI divided by property value. Lower cap rates indicate higher-priced markets; higher cap rates indicate higher risk or lower-priced markets.
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