Question

If income remains constant and the capitalization rate is reduced, what is the effect

on value?
a. insufficient information
b. decreases
c. increases
d. no effect

Answer 1

When income remains constant and the capitalization rate is reduced, the value of the property increases. option c is correct.

Step-by-step explanation:

This is because the capitalization rate is the percentage rate used to determine the value of an income-producing property.

When the rate is reduced, it means that the property's value increases relative to its income.

For example, if a property annually generates $10,000 in income and the capitalization rate is 5%, the value of the property would be $200,000 ($10,000 / 0.05).

Therefore , option c is correct.