Property Valuation
A Montana appraiser uses a 'capitalization rate' that is higher than that used for a comparable property in a more desirable Bozeman neighborhood. This higher cap rate reflects:
AHigher demand and more appreciation potential
BGreater risk or lower desirability, resulting in a lower value for the same income stream✓ Correct
CLower operating expenses for the property
DA more stable and desirable income stream
Explanation
A higher capitalization rate indicates greater risk or lower desirability. For the same NOI, a higher cap rate produces a lower value (Value = NOI / Cap Rate).
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