California Real Estate Practice Exam

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Another term for the capitalization rate in the income approach to estimating value is?

Rate of return
Annual yield
Interest rate
Dividend rate

The correct answer is: Rate of return

One potential term used to describe the capitalization rate in the income approach is the rate of return. This refers to the percentage of return an investor can expect to receive on their investment. Options B, C, and D are not correct as they do not accurately describe the capitalization rate. Annual yield typically refers to the total dividend or interest received over a year, while interest rate specifically refers to the percentage charged for borrowing money. Dividend rate only applies to stocks and does not take into account the overall value of an investment. Therefore, the best option is A, rate of return.