LAND & BUILDING VALUER EXAMINATION

MOCK TEST – 1

EXAM-READY VERSION WITH CORRECT ANSWERS & EXPLANATIONS

QUESTION NO. 1

Which of the following best describes the concept of “consumer surplus”?

OPTION 1: The difference between the price paid and the cost of production
OPTION 2: The excess of what a consumer is willing to pay over what is actually paid
OPTION 3: The surplus goods left after consumption
OPTION 4: The utility derived from the last unit consumed

CORRECT ANSWER: OPTION 2

EXPLANATION:
Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good and the actual price paid. It represents the benefit or economic advantage enjoyed by the consumer.

QUESTION NO. 2

An indifference curve is convex to the origin because of:

OPTION 1: Law of diminishing returns
OPTION 2: Diminishing marginal rate of substitution
OPTION 3: Constant marginal utility
OPTION 4: Increasing marginal utility

CORRECT ANSWER: OPTION 2

EXPLANATION:
An indifference curve is normally convex to the origin because of the diminishing marginal rate of substitution (MRS). As the consumer obtains more of one commodity, the amount of the other commodity that the consumer is willing to sacrifice for an additional unit generally decreases.

QUESTION NO. 3

If the price of a good rises and its demand also rises, it is most likely to be a:

OPTION 1: Giffen good
OPTION 2: Normal good
OPTION 3: Inferior good
OPTION 4: Complementary good

CORRECT ANSWER: OPTION 1

EXPLANATION:
A Giffen good is an exceptional type of inferior good for which an increase in price can result in an increase in quantity demanded because the negative income effect dominates the substitution effect.

QUESTION NO. 4

The equilibrium price in a market is determined when:

OPTION 1: Supply exceeds demand
OPTION 2: Demand equals supply
OPTION 3: Government fixes the price
OPTION 4: Producers set the maximum price

CORRECT ANSWER: OPTION 2

EXPLANATION:
Market equilibrium occurs where the quantity demanded equals the quantity supplied. The corresponding price is called the equilibrium price.

QUESTION NO. 5

Under perfect competition, in the long run, firms normally earn:

OPTION 1: Super-normal profits
OPTION 2: Losses
OPTION 3: Normal profits only
OPTION 4: Zero revenue

CORRECT ANSWER: OPTION 3

EXPLANATION:
Under perfect competition, free entry and exit of firms eliminate persistent super-normal profits and losses in the long run. Firms earn normal profit, which is the minimum return necessary to keep resources in their current use.

QUESTION NO. 6

The theory of rent propounded by David Ricardo is primarily based on:

OPTION 1: Location advantage
OPTION 2: Differential fertility and productivity of land
OPTION 3: Market demand for land alone
OPTION 4: Capital invested in land

CORRECT ANSWER: OPTION 2

EXPLANATION:
Ricardo’s theory of economic rent is based principally on differences in fertility/productivity of land. Scarce land of superior quality earns differential rent compared with marginal land.

QUESTION NO. 7

Gross interest includes:

OPTION 1: Net interest plus elements such as risk, management and liquidity compensation
OPTION 2: Only pure payment for the use of capital
OPTION 3: Net interest minus inflation
OPTION 4: Risk premium alone

CORRECT ANSWER: OPTION 1

EXPLANATION:
Gross interest is broader than pure or net interest. It may include compensation for risk, inconvenience/liquidity considerations, management and other components, depending on the framework used.

QUESTION NO. 8

Which of the following is NOT a standard function of money?

OPTION 1: Medium of exchange
OPTION 2: Store of value
OPTION 3: Measure of production
OPTION 4: Standard of deferred payment

CORRECT ANSWER: OPTION 3

EXPLANATION:
The classical functions of money include medium of exchange, measure/unit of value, store of value and standard of deferred payment. “Measure of production” is not a standard function of money.

QUESTION NO. 9

Demand-pull inflation is caused by:

OPTION 1: Excess aggregate demand over aggregate supply
OPTION 2: Rise in cost of raw materials
OPTION 3: Reduction in money supply
OPTION 4: Fall in government spending

CORRECT ANSWER: OPTION 1

EXPLANATION:
Demand-pull inflation occurs when aggregate demand grows faster than the economy’s ability to produce goods and services, putting upward pressure on prices.

QUESTION NO. 10

Deficit financing refers to:

OPTION 1: Financing a government deficit through borrowing/creation of money, historically including central-bank financing
OPTION 2: Tax revenue exceeding expenditure
OPTION 3: Export surplus
OPTION 4: Reduction in public expenditure

CORRECT ANSWER: OPTION 1

EXPLANATION:
Deficit financing broadly refers to financing a budgetary/fiscal deficit through borrowing and, in traditional usage, monetary financing. Option 1 captures the intended concept, although deficit financing is broader than borrowing specifically from the central bank.

QUESTION NO. 11

Double-entry book-keeping is based on the principle that:

OPTION 1: Every debit has a corresponding credit
OPTION 2: All transactions are recorded twice in the same manner
OPTION 3: Assets always exceed liabilities
OPTION 4: Income equals expenditure

CORRECT ANSWER: OPTION 1

EXPLANATION:
Every accounting transaction has two aspects, and the debit and credit entries must be equal. Thus, total debits must equal total credits.

QUESTION NO. 12

A break-even point is where:

OPTION 1: Total revenue equals total fixed costs
OPTION 2: Total revenue equals total cost
OPTION 3: Variable cost equals zero
OPTION 4: Profit is maximized

CORRECT ANSWER: OPTION 2

EXPLANATION:
At the break-even point:

Total Revenue = Total Cost

Therefore, the business has neither profit nor loss.

QUESTION NO. 13

Which of the following is a salient feature of the Indian Constitution?

OPTION 1: Unitary polity with no federal features
OPTION 2: Parliamentary democracy with federal characteristics
OPTION 3: Presidential form of government
OPTION 4: Absence of single citizenship

CORRECT ANSWER: OPTION 2

EXPLANATION:
India has a parliamentary system and a constitutional structure with significant federal features, although it has strong unitary elements. India also follows single citizenship.

QUESTION NO. 14

A void contract is one that:

OPTION 1: Can be enforced by either party
OPTION 2: Is enforceable at the option of one party
OPTION 3: Has no legal enforceability
OPTION 4: Becomes void only after breach

CORRECT ANSWER: OPTION 3

EXPLANATION:
Under the Indian Contract Act, an agreement that is not enforceable by law is void. A voidable contract, by contrast, is enforceable at the option of one party.

QUESTION NO. 15

Under the SARFAESI Act, 2002, a secured creditor may generally enforce security interest without court intervention when the secured debt qualifies under the Act and the account has become an NPA. The relevant classification is:

OPTION 1: Standard asset
OPTION 2: Doubtful asset
OPTION 3: Non-Performing Asset (NPA)
OPTION 4: Special Mention Account

CORRECT ANSWER: OPTION 3

EXPLANATION:
Section 13 of the SARFAESI Act enables a secured creditor to enforce security interest, subject to statutory conditions. A key trigger is classification of the borrower’s account as an NPA in accordance with applicable RBI norms.

QUESTION NO. 16

Section 247 of the Companies Act, 2013 pertains to:

OPTION 1: Winding up of companies
OPTION 2: Valuation by registered valuers
OPTION 3: Appointment of directors
OPTION 4: Merger procedure

CORRECT ANSWER: OPTION 2

EXPLANATION:
Section 247 deals with valuation by registered valuers. It provides the statutory framework concerning valuation by persons registered as valuers in accordance with the prescribed provisions.

QUESTION NO. 17

Which measure of central tendency is most affected by extreme values?

OPTION 1: Mode
OPTION 2: Median
OPTION 3: Mean
OPTION 4: Quartile

CORRECT ANSWER: OPTION 3

EXPLANATION:
The arithmetic mean uses every observation in the dataset. Consequently, unusually high or low observations can substantially change the mean. Median and mode are comparatively less sensitive to extreme values.

QUESTION NO. 18

In regression analysis, the variable that is predicted is called the:

OPTION 1: Independent variable
OPTION 2: Dependent variable
OPTION 3: Control variable
OPTION 4: Constant

CORRECT ANSWER: OPTION 2

EXPLANATION:
The dependent variable is the variable whose value is being explained or predicted. Independent variables are used to explain variations in the dependent variable.

QUESTION NO. 19

Environmental impact on property value is most appropriately captured by:

OPTION 1: Income approach alone
OPTION 2: Cost-to-cure or appropriate adjustment for environmental impairment
OPTION 3: Residual technique alone
OPTION 4: Profit method

CORRECT ANSWER: OPTION 2

EXPLANATION:
Environmental contamination or impairment may reduce market value. Where technically feasible, a cost-to-cure approach, together with market evidence and other relevant adjustments, may be used to quantify the impact.

QUESTION NO. 20

The Water (Prevention and Control of Pollution) Act was enacted in:

OPTION 1: 1972
OPTION 2: 1974
OPTION 3: 1981
OPTION 4: 1986

CORRECT ANSWER: OPTION 2

EXPLANATION:
The Water (Prevention and Control of Pollution) Act, 1974 provides the statutory framework for prevention and control of water pollution and establishes the Central and State Pollution Control Boards.

QUESTION NO. 21

The Model Code of Conduct under the Companies (Registered Valuers and Valuation) Rules, 2017 requires a valuer to maintain:

OPTION 1: Confidentiality of client information
OPTION 2: A maximum fee structure
OPTION 3: Partnership with the client
OPTION 4: Shareholding in the company being valued

CORRECT ANSWER: OPTION 1

EXPLANATION:
Professional ethics require the registered valuer to maintain confidentiality of information obtained during professional engagement, subject to legal requirements for disclosure.

QUESTION NO. 22

Under RERA, 2016, a real estate agent generally has to register with:

OPTION 1: District Collector
OPTION 2: RERA Authority of the respective State/UT
OPTION 3: Ministry of Finance
OPTION 4: IBBI directly

CORRECT ANSWER: OPTION 2

EXPLANATION:
Under Section 9 of RERA, a real estate agent facilitating transactions in registered projects is required to obtain registration with the Real Estate Regulatory Authority established for the relevant State/UT.

QUESTION NO. 23

Section 53A of the Transfer of Property Act, 1882 deals with:

OPTION 1: Simple mortgage
OPTION 2: Doctrine of part performance
OPTION 3: Gift of property
OPTION 4: Exchange of immovable property

CORRECT ANSWER: OPTION 2

EXPLANATION:
Section 53A embodies the doctrine of part performance. Subject to its statutory requirements, a transferee in possession under a written contract may defend possession against the transferor even though the transfer has not been completed in the prescribed manner.

QUESTION NO. 24

Capitalization rate in property valuation is best described as:

OPTION 1: Total rent divided by total area
OPTION 2: Yield rate used to convert income into capital value
OPTION 3: Rate of depreciation of a building
OPTION 4: Rate of inflation in construction cost

CORRECT ANSWER: OPTION 2

EXPLANATION:
Capitalization rate is the rate used to convert a property’s stabilized annual income into capital value.

Capital Value = Net Annual Income ÷ Capitalization Rate

QUESTION NO. 25

Which Indian Accounting Standard deals with “Investment Property”?

OPTION 1: Ind AS 16
OPTION 2: Ind AS 36
OPTION 3: Ind AS 40
OPTION 4: Ind AS 113

CORRECT ANSWER: OPTION 3

EXPLANATION:
Ind AS 40 – Investment Property deals with property held to earn rentals, for capital appreciation, or both, subject to the standard’s scope.

QUESTION NO. 26

A sinking fund is established to:

OPTION 1: Maximize current income
OPTION 2: Accumulate a sum for replacement or redemption of an asset/obligation
OPTION 3: Pay interest on borrowed capital
OPTION 4: Calculate depreciation on land

CORRECT ANSWER: OPTION 2

EXPLANATION:
A sinking fund involves periodic contributions that are accumulated, usually with compound interest, to create a required amount at a future date—for example, replacement of a wasting asset.

QUESTION NO. 27

The highest and best use of land is the use that is:

OPTION 1: Most profitable to the developer in every circumstance
OPTION 2: Physically possible, legally permissible, financially feasible and maximally productive
OPTION 3: Merely allowed by the local authority
OPTION 4: Most common in the neighbourhood

CORRECT ANSWER: OPTION 2

EXPLANATION:
Highest and best use requires consideration of four principal tests:

Physically possible
Legally permissible
Financially feasible
Maximally productive

QUESTION NO. 28

Years Purchase (YP) is the reciprocal of:

OPTION 1: Net annual income
OPTION 2: Capitalization rate
OPTION 3: Gross development value
OPTION 4: Sinking fund factor

CORRECT ANSWER: OPTION 2

EXPLANATION:

For a perpetuity:

YP = 1 ÷ Capitalization Rate

For example, at 10% capitalization:

YP = 1 ÷ 0.10 = 10 years

QUESTION NO. 29

The Internal Rate of Return (IRR) is the discount rate at which:

OPTION 1: NPV is maximized
OPTION 2: NPV equals zero
OPTION 3: Cash inflows equal cash outflows without discounting
OPTION 4: Profit is highest

CORRECT ANSWER: OPTION 2

EXPLANATION:
IRR is the discount rate at which the Net Present Value (NPV) of all project cash flows becomes zero.

QUESTION NO. 30

The hedonic pricing model in real estate valuation uses:

OPTION 1: Auction results only
OPTION 2: Regression of property prices on their attributes
OPTION 3: Rental income multiplied by YP
OPTION 4: Replacement cost approach

CORRECT ANSWER: OPTION 2

EXPLANATION:
The hedonic model statistically relates property prices to characteristics such as location, area, age, floor, amenities, parking and other attributes. Regression analysis estimates the contribution of these attributes to price.

QUESTION NO. 31

Economic obsolescence in building valuation arises mainly from:

OPTION 1: Physical wear and tear
OPTION 2: Outdated internal design or layout
OPTION 3: External factors such as neighbourhood decline or adverse regulatory changes
OPTION 4: Change in roofing material

CORRECT ANSWER: OPTION 3

EXPLANATION:
Economic obsolescence is generally caused by external factors beyond the property’s immediate physical condition—for example, declining neighbourhood conditions, changes in regulations, environmental problems or adverse economic conditions.

QUESTION NO. 32

Depreciated Replacement Cost (DRC) is particularly appropriate when:

OPTION 1: Reliable market evidence is abundant
OPTION 2: The property is specialised and market transactions are limited or absent
OPTION 3: Rental evidence is readily available
OPTION 4: Income approach is always higher

CORRECT ANSWER: OPTION 2

EXPLANATION:
DRC is commonly used for specialised properties for which comparable market evidence is inadequate. The approach generally considers land value plus the depreciated replacement cost of improvements, subject to appropriate adjustments.

QUESTION NO. 33

Stamp duty valuation of immovable property is generally linked to:

OPTION 1: Book value
OPTION 2: Circle rate/guideline value or other statutory valuation mechanism prescribed by the State
OPTION 3: Insured value
OPTION 4: Income capitalization alone

CORRECT ANSWER: OPTION 2

EXPLANATION:
State stamp laws commonly prescribe a circle rate, guideline value, collector rate or similar statutory benchmark for determining stamp-duty purposes. The exact terminology and methodology vary by State.

QUESTION NO. 34

Under the Income-tax Act, 1961, Section 22 primarily deals with:

OPTION 1: Income from house property
OPTION 2: Reporting under RERA
OPTION 3: Gift tax valuation
OPTION 4: Insurance claims

CORRECT ANSWER: OPTION 1

EXPLANATION:
The original question was technically incorrect. Section 22 of the Income-tax Act, 1961 dealt with income from house property, not determination of fair market value by a registered valuer.

For valuation of capital assets in specified circumstances, provisions such as Section 55A were relevant under the 1961 Act.

Exam alert: Since the Income-tax Act, 2025 came into force on 1 April 2026, current-law questions should be framed with care and should specify the applicable assessment/tax year.

QUESTION NO. 35

In building insurance, “reinstatement value” generally means:

OPTION 1: Market value of land and building together
OPTION 2: Cost of rebuilding/reinstating the structure as new at current prices, subject to policy terms, generally excluding land
OPTION 3: Indemnity value after depreciation
OPTION 4: Government circle rate

CORRECT ANSWER: OPTION 2

EXPLANATION:
Reinstatement value relates to the cost of replacing or rebuilding the insured building with a substantially similar new structure, subject to the terms and conditions of the insurance policy. Land value is ordinarily excluded.

QUESTION NO. 36

The “condition of average” in fire insurance means that when a property is under-insured:

OPTION 1: The entire claim is paid
OPTION 2: The claim may be reduced proportionately
OPTION 3: The policy automatically becomes void
OPTION 4: Additional premium is automatically charged retrospectively

CORRECT ANSWER: OPTION 2

EXPLANATION:
Under an average clause, if the sum insured is less than the value at risk, the insurer may apply a proportionate reduction to the claim.

QUESTION NO. 37

A valuation report prepared for mortgage purposes should primarily reflect:

OPTION 1: Historical cost only
OPTION 2: Market value and, where required by the lender, an appropriately assessed Forced Sale Value
OPTION 3: Replacement cost only
OPTION 4: Rental income capitalized at a fixed 5%

CORRECT ANSWER: OPTION 2

EXPLANATION:
For lending purposes, the lender generally needs an assessment of the property’s market value and may additionally require Forced Sale Value (FSV) or another lending-specific value basis. The applicable lender/assignment instructions must be followed.

QUESTION NO. 38

The valuation significance of R.C. Cooper v. Union of India (1970) includes recognition of appropriate valuation principles for compensation and the use of capitalisation of income where appropriate. Which statement is most accurate?

OPTION 1: Compensation must always be based solely on construction cost
OPTION 2: Capitalisation of appropriate rental/income can be a satisfactory valuation method where the property is fully and legally utilised and the income is commercially representative
OPTION 3: Book value is always conclusive
OPTION 4: Government determination can never be examined by a court

CORRECT ANSWER: OPTION 2

EXPLANATION:
The original question incorrectly reduced the case to a blanket rule that compensation must equal market value on the acquisition date. The valuation significance of R.C. Cooper v. Union of India includes discussion of capitalisation of rental value and the circumstances in which that method can provide a satisfactory measure of value.

QUESTION NO. 39

Under the Land Acquisition, Rehabilitation and Resettlement Act, 2013, consent of what percentage of affected families is generally required for acquisition for private companies?

OPTION 1: 50%
OPTION 2: 60%
OPTION 3: 70%
OPTION 4: 80%

CORRECT ANSWER: OPTION 4

EXPLANATION:
For acquisition for private companies, Section 2(2) of the 2013 Act provides for consent of at least 80% of affected families. For certain PPP projects, the threshold is 70%.

QUESTION NO. 40

Section 52 of the Indian Easements Act, 1882 deals with:

OPTION 1: An easement creating an interest in property
OPTION 2: Licence to do something on another’s immovable property without creating an easement or interest
OPTION 3: Permanent mortgage of a right of passage
OPTION 4: Registration of easements

CORRECT ANSWER: OPTION 2

EXPLANATION:
The original question was legally incorrect. Section 52 defines “licence”, not right of way. A licence permits an act on another person’s immovable property without creating an easement or an interest in the property.

A right of way is an easement and should not be described as Section 52 of the Easements Act.

QUESTION NO. 41

Under rent-control legislation, “standard rent” is generally:

OPTION 1: Always higher than market rent
OPTION 2: Rent determined according to the applicable rent-control statute/formula
OPTION 3: Freely negotiated without statutory restrictions
OPTION 4: Equal to the guideline value

CORRECT ANSWER: OPTION 2

EXPLANATION:
Standard rent is a statutorily controlled rent, where the applicable rent-control legislation provides for such a concept. The exact method of determination differs between jurisdictions.

QUESTION NO. 42

A leasehold interest is the interest of the:

OPTION 1: Lessor
OPTION 2: Lessee/tenant
OPTION 3: Mortgagee
OPTION 4: Government

CORRECT ANSWER: OPTION 2

EXPLANATION:
A leasehold interest is the interest acquired by the lessee under a lease. The lessor retains the underlying ownership/reversionary interest, subject to the terms of the lease.

QUESTION NO. 43

The profit method of valuation is most appropriate for:

OPTION 1: Ordinary residential apartments
OPTION 2: Agricultural land
OPTION 3: Hotels, cinemas, petrol pumps and similar trading properties
OPTION 4: Vacant residential plots

CORRECT ANSWER: OPTION 3

EXPLANATION:
The profit method is suitable for properties whose value is closely linked to their trading potential or business profitability, such as hotels, cinemas, petrol stations and certain specialised commercial establishments.

QUESTION NO. 44

Green buildings primarily aim to:

OPTION 1: Maximise floor-area ratio
OPTION 2: Reduce energy consumption and environmental impact
OPTION 3: Guarantee higher rental yields
OPTION 4: Comply only with FSI norms

CORRECT ANSWER: OPTION 2

EXPLANATION:
Green buildings focus on energy efficiency, water efficiency, resource conservation, lower emissions, waste reduction and reduced environmental impact throughout the building’s life cycle.

QUESTION NO. 45

In CWT v. P.N. Sikand (1977), the Supreme Court’s valuation principles include the importance of:

OPTION 1: Ignoring all restrictions affecting property value
OPTION 2: Considering relevant encumbrances/restrictions and appropriate market evidence in determining value
OPTION 3: Treating construction cost as conclusive
OPTION 4: Applying income method in every case

CORRECT ANSWER: OPTION 2

EXPLANATION:
A valuer must consider legally enforceable restrictions and encumbrances that affect the interest being valued. CWT v. P.N. Sikand is an important valuation case concerning determination of the value of property subject to restrictions and the proper consideration of such liabilities.

QUESTION NO. 46

The primary sector of the economy comprises:

OPTION 1: Manufacturing and industry
OPTION 2: Agriculture, forestry, fishing and mining
OPTION 3: Services and trade
OPTION 4: Real estate and finance

CORRECT ANSWER: OPTION 2

EXPLANATION:
The primary sector directly uses natural resources and includes agriculture, forestry, fishing, mining and related extractive activities.

QUESTION NO. 47

GDP measures:

OPTION 1: Total income of all citizens, including income earned abroad
OPTION 2: Total value of final goods and services produced within a country’s economic territory during a specified period
OPTION 3: Net exports only
OPTION 4: Government expenditure alone

CORRECT ANSWER: OPTION 2

EXPLANATION:
Gross Domestic Product measures the value of final goods and services produced within the country’s domestic territory during a specified period.

QUESTION NO. 48

Under the Insolvency and Bankruptcy Code framework, valuation for specified insolvency purposes is undertaken by:

OPTION 1: Any chartered accountant
OPTION 2: Registered valuers in accordance with the applicable IBC/IBBI framework
OPTION 3: Government-approved surveyors only
OPTION 4: Banks’ internal teams only

CORRECT ANSWER: OPTION 2

EXPLANATION:
For specified valuation requirements under the IBC framework, valuation is carried out by registered valuers meeting the prescribed eligibility and procedural requirements.

QUESTION NO. 49

Which of the following may constitute a tort relevant to valuation practice?

OPTION 1: Breach of a lease covenant only
OPTION 2: Negligent valuation causing foreseeable financial loss in circumstances giving rise to a duty of care
OPTION 3: Non-payment of stamp duty
OPTION 4: Violation of building bylaws

CORRECT ANSWER: OPTION 2

EXPLANATION:
A professional valuer may potentially incur tortious liability for negligence where a duty of care exists and negligent professional work causes legally recoverable loss. The precise liability depends on facts and applicable law.

QUESTION NO. 50

The hypothetical plotting scheme is used in land valuation when:

OPTION 1: Land has rental income
OPTION 2: A large parcel is valued by assuming subdivision into smaller plots and estimating the resulting development value
OPTION 3: Land is necessarily agricultural
OPTION 4: Land is under compulsory acquisition

CORRECT ANSWER: OPTION 2

EXPLANATION:
The hypothetical development/plotting approach considers what the land could realise if subdivided and developed into plots, after allowing for roads, amenities, development costs, time, marketing and developer’s profit.

QUESTION NO. 51

An entrepreneur’s profit is best described as:

OPTION 1: Interest on capital
OPTION 2: Residual reward after accounting for other factor payments and business risks
OPTION 3: Salary of the manager
OPTION 4: Rent of business premises

CORRECT ANSWER: OPTION 2

EXPLANATION:
Entrepreneurial profit is traditionally treated as the residual return after payment for other factors of production. It also compensates the entrepreneur for risk, uncertainty, innovation and decision-making.

QUESTION NO. 52

Price elasticity of demand is unitary if:

OPTION 1: A 10% increase in price causes a 5% fall in demand
OPTION 2: A 10% increase in price causes a 10% fall in quantity demanded
OPTION 3: Demand does not change
OPTION 4: Demand changes more than proportionately

CORRECT ANSWER: OPTION 2

EXPLANATION:
Unitary elasticity means:

Percentage change in quantity demanded = Percentage change in price

Thus, elasticity in absolute terms is 1.

QUESTION NO. 53

A monopolist may earn super-normal profits in the long run because:

OPTION 1: There is free entry of firms
OPTION 2: Entry barriers restrict potential competitors
OPTION 3: Government always subsidizes monopolists
OPTION 4: Demand is perfectly elastic

CORRECT ANSWER: OPTION 2

EXPLANATION:
Unlike perfect competition, monopoly markets may have substantial barriers to entry, allowing a monopolist to sustain economic profits over the long term.

QUESTION NO. 54

The market supply curve generally slopes upward because:

OPTION 1: Higher prices encourage greater supply
OPTION 2: Consumers buy more at lower prices
OPTION 3: Government controls supply
OPTION 4: Fixed costs fall as output rises

CORRECT ANSWER: OPTION 1

EXPLANATION:
The upward-sloping supply curve reflects the general tendency of producers to supply larger quantities at higher prices, subject to the characteristics of the market and time period.

QUESTION NO. 55

Which of the following is NOT a book of prime entry?

OPTION 1: Cash book
OPTION 2: Journal
OPTION 3: Trial balance
OPTION 4: Purchase book

CORRECT ANSWER: OPTION 3

EXPLANATION:
Books of prime/original entry record transactions before posting to the ledger. Examples include the journal, cash book and purchase book. A trial balance is a statement prepared from ledger balances and is not a book of prime entry.

QUESTION NO. 56

The doctrine of indemnity in insurance means:

OPTION 1: The insured should profit from a loss
OPTION 2: The insured is restored, subject to policy terms, to substantially the same financial position as before the loss
OPTION 3: The insurer always pays more than the loss
OPTION 4: A fixed amount is paid irrespective of actual loss

CORRECT ANSWER: OPTION 2

EXPLANATION:
The principle of indemnity is intended to compensate the insured for the actual insured loss, rather than allow the insured to make a profit from the occurrence of the insured event.

QUESTION NO. 57

A “charge” on immovable property under Section 100 of the Transfer of Property Act, 1882 may arise by:

OPTION 1: Oral agreement alone in every case
OPTION 2: Operation of law or act of parties
OPTION 3: Court order only
OPTION 4: Government notification only

CORRECT ANSWER: OPTION 2

EXPLANATION:
A charge may arise by operation of law or by act of parties, without amounting to a mortgage. The property is made security for payment of money without creating a mortgage interest in the statutory sense.

QUESTION NO. 58

A secured loan or advance under the Banking Regulation Act is generally one that is:

OPTION 1: Given without security
OPTION 2: Secured by assets/security of the prescribed nature
OPTION 3: Guaranteed only by the Government
OPTION 4: Necessarily an overdraft

CORRECT ANSWER: OPTION 2

EXPLANATION:
A secured loan is backed by security/collateral of the legally recognised kind. It is distinguished from an unsecured loan, which relies primarily on the borrower’s creditworthiness.

QUESTION NO. 59

Functional obsolescence in a building arises due to:

OPTION 1: Physical decay
OPTION 2: Outdated design or layout reducing utility
OPTION 3: Decline in neighbourhood desirability
OPTION 4: Rise in property taxes

CORRECT ANSWER: OPTION 2

EXPLANATION:
Functional obsolescence arises when the design, layout, specification or functionality of a building becomes outdated compared with current requirements.

QUESTION NO. 60

The reversionary value of a property is the present value of:

OPTION 1: Current rental income
OPTION 2: The value expected to be received at the end of a lease or specified term
OPTION 3: Original construction cost
OPTION 4: Business goodwill

CORRECT ANSWER: OPTION 2

EXPLANATION:
The reversion represents the value that will accrue to the owner after expiry of the lease or at the end of the relevant income period. For present valuation, that future value is discounted to the valuation date.

QUESTION NO. 61

In valuation, “scarcity” as an element of value means:

OPTION 1: The property is dilapidated
OPTION 2: Supply is limited relative to demand
OPTION 3: Transfer is legally restricted
OPTION 4: The property is environmentally damaged

CORRECT ANSWER: OPTION 2

EXPLANATION:
Scarcity contributes to value when a property/resource is limited in supply relative to demand. Other things being equal, greater scarcity can support higher value.

QUESTION NO. 62

A trading account is prepared to ascertain:

OPTION 1: Net profit or net loss
OPTION 2: Gross profit or gross loss
OPTION 3: Cash position
OPTION 4: Capital employed

CORRECT ANSWER: OPTION 2

EXPLANATION:
A trading account compares sales with cost of goods sold to determine gross profit or gross loss.

QUESTION NO. 63

Sampling is preferred over a census when:

OPTION 1: The population is very small
OPTION 2: 100% accuracy is mandatory
OPTION 3: The population is large and resources are limited
OPTION 4: Data is already available

CORRECT ANSWER: OPTION 3

EXPLANATION:
When the population is very large, examining every unit may be costly and time-consuming. A properly designed representative sample can provide useful estimates with considerably lower resources.

QUESTION NO. 64

Under the Hindu Succession Act, 1956, as amended in 2005, daughters have:

OPTION 1: No right in coparcenary property
OPTION 2: Equal coparcenary rights as sons
OPTION 3: Rights only in self-acquired property
OPTION 4: Rights only after marriage

CORRECT ANSWER: OPTION 2

EXPLANATION:
The 2005 amendment gave daughters equal rights and liabilities as sons in coparcenary property in a Mitakshara joint Hindu family, subject to the statutory framework and judicial interpretation.

QUESTION NO. 65

The term “parallel economy” refers to:

OPTION 1: A dual-sector economic model
OPTION 2: Economic activities conducted outside official reporting/tax systems
OPTION 3: Barter trade between countries
OPTION 4: Public and private sectors operating together

CORRECT ANSWER: OPTION 2

EXPLANATION:
Parallel economy commonly refers to unreported, concealed or informal economic activities, particularly transactions intended to avoid official recording or taxation.

QUESTION NO. 66

In the cost approach to valuation, land value is generally determined by:

OPTION 1: Income capitalization alone
OPTION 2: Market evidence for the land separately from the building
OPTION 3: DRC of the entire property without separation
OPTION 4: Replacement cost of land

CORRECT ANSWER: OPTION 2

EXPLANATION:
Land is not depreciated in the same manner as buildings. In the cost approach, land value is generally estimated separately using comparable land transactions or other appropriate land valuation evidence, and the depreciated improvement value is then added.

QUESTION NO. 67

A valuer acting as an expert witness in court must:

OPTION 1: Advocate for the client
OPTION 2: Provide an independent and objective professional opinion to assist the court
OPTION 3: Follow whichever valuation conclusion the judge suggests
OPTION 4: Decline cross-examination

CORRECT ANSWER: OPTION 2

EXPLANATION:
An expert witness has a primary professional responsibility to the court/tribunal to provide an independent, impartial and technically reasoned opinion. The valuer should not become an advocate for the party who appointed him.

QUESTION NO. 68

Wenger & Co. v. DVO (1978) is significant in valuation because it recognised:

OPTION 1: Only compulsory acquisition valuation
OPTION 2: The acceptability of using different valuation approaches for different portions/characteristics of a property where justified by evidence
OPTION 3: Only agricultural land valuation
OPTION 4: Only stamp-duty valuation

CORRECT ANSWER: OPTION 2

EXPLANATION:
The Delhi High Court case concerned valuation of the Wenger Building in Connaught Place. The DVO used an income-based method for the let-out portion and comparable/sales-based evidence for the self-occupied portion. The court accepted the approach as a permissible valuation methodology in the circumstances.

QUESTION NO. 69

Capital formation in an economy means:

OPTION 1: Formation of new companies only
OPTION 2: Addition to the stock of physical capital through investment
OPTION 3: Collection of taxes
OPTION 4: Increase in foreign exchange reserves

CORRECT ANSWER: OPTION 2

EXPLANATION:
Capital formation refers to the creation or acquisition of productive assets, such as machinery, buildings, infrastructure and other capital goods, through investment.

QUESTION NO. 70

A will under Indian succession law generally becomes operative:

OPTION 1: On execution
OPTION 2: On the death of the testator
OPTION 3: Only upon registration
OPTION 4: Only when probate is applied for

CORRECT ANSWER: OPTION 2

EXPLANATION:
A will is intended to operate upon the death of the testator. Registration is not generally what makes an otherwise valid will operative. Probate requirements depend upon the applicable succession law and circumstances.

QUESTION NO. 71

Ind AS 113 relates to:

OPTION 1: Property, Plant and Equipment
OPTION 2: Impairment of Assets
OPTION 3: Fair Value Measurement
OPTION 4: Investment Property

CORRECT ANSWER: OPTION 3

EXPLANATION:
Ind AS 113 – Fair Value Measurement establishes the framework for measuring fair value and related disclosure requirements.

QUESTION NO. 72

The residual technique in land valuation involves:

OPTION 1: Deducting land value from total property value
OPTION 2: Estimating development value and deducting development costs, finance/time costs and appropriate profit to derive residual land value
OPTION 3: Capitalising ground rent only
OPTION 4: Adding replacement cost to site value

CORRECT ANSWER: OPTION 2

EXPLANATION:

The basic concept is:

Residual Land Value = Gross Development Value – Development Costs – Finance/Other Costs – Developer’s Profit

The residual amount represents the amount that can reasonably be attributed to the land, subject to the assumptions of the valuation.

QUESTION NO. 73

Under the Arbitration and Conciliation Act, an arbitral award is generally:

OPTION 1: Automatically appealable in every case
OPTION 2: Final and binding subject to limited statutory grounds of challenge
OPTION 3: Enforceable only by the government
OPTION 4: A decree only after mandatory ratification in every case

CORRECT ANSWER: OPTION 2

EXPLANATION:
An arbitral award is generally final and binding on the parties, subject to the limited statutory mechanism for setting aside/challenging an award. There is no unrestricted appeal on merits equivalent to an ordinary civil suit.

QUESTION NO. 74

A lien generally gives the holder the right to:

OPTION 1: Automatically sell the property
OPTION 2: Retain possession until the relevant claim is satisfied, where the law recognises such lien
OPTION 3: Transfer ownership to a third party
OPTION 4: Collect rent automatically

CORRECT ANSWER: OPTION 2

EXPLANATION:
A lien is essentially a right of retention until the secured claim is satisfied, subject to the nature of the lien and applicable law. It does not automatically confer ownership or a general right of sale.

CASE STUDY I

Leasehold/Lessor’s Interest – Commercial Property

Given:

Passing rent = ₹60,000 per month
Outgoings = ₹8,000 per month
Lease remaining = 8 years
Market rent = ₹90,000 per month
Lessor’s remunerative rate = 8%
Accumulative/sinking-fund rate = 4%

QUESTION NO. 75

The lessor’s net contract rent per annum after deducting outgoings is:

OPTION 1: ₹7,20,000
OPTION 2: ₹6,24,000
OPTION 3: ₹10,80,000
OPTION 4: ₹9,84,000

CORRECT ANSWER: OPTION 2 – ₹6,24,000

EXPLANATION:

Monthly net contract rent:

₹60,000 – ₹8,000 = ₹52,000

Annual net contract rent:

₹52,000 × 12 = ₹6,24,000

Therefore:

Correct Answer = ₹6,24,000

QUESTION NO. 76

Using an 8% remunerative rate and a 4% sinking-fund/accumulative rate for an 8-year term, the dual-rate YP should be calculated using the applicable dual-rate formula. Which statement is correct?

OPTION 1: 5.97
OPTION 2: 2.44 approximately, if the standard sinking-fund contribution formula is used
OPTION 3: 6.25
OPTION 4: 7.12

CORRECT ANSWER: OPTION 2 – Approximately 2.44

EXPLANATION:

The original answer key’s 4.81 is not mathematically supported by the standard dual-rate formulation.

For an 8-year term:

Sinking fund factor at 4%:

$s=0.04(1.04)8−1s=\frac{0.04}{(1.04)^8-1}$ $s≈0.10853s\approx0.10853$

The dual-rate capitalization denominator is:

$0.08+0.10853=0.188530.08+0.10853=0.18853$

The 8-year annuity factor at 8% is approximately:

$1−(1.08)−80.08≈5.7466\frac{1-(1.08)^{-8}}{0.08}\approx5.7466$

The corresponding dual-rate YP is approximately:

$1−(1.08)−80.08+0.10853≈2.44\frac{1-(1.08)^{-8}}{0.08+0.10853} \approx2.44$

Therefore, the earlier figure of 5.30/4.81 should not be used without a clearly specified alternative valuation convention.

QUESTION NO. 77

Using the dual-rate YP of approximately 2.44, the value of the lessor’s interest during the remaining lease term is approximately:

OPTION 1: ₹15,23,000
OPTION 2: ₹29,97,000
OPTION 3: ₹33,07,200
OPTION 4: ₹41,20,000

CORRECT ANSWER: OPTION 1 – Approximately ₹15.23 lakh

EXPLANATION:

Net annual contract rent:

₹6,24,000

Using dual-rate YP:

≈ 2.44

Therefore:

$₹6,24,000×2.44₹6,24,000\times2.44$ $≈₹15,22,560\approx ₹15,22,560$

Hence, the term value is approximately:

₹15.23 lakh

The previous answer of ₹29.97 lakh resulted from an incorrect YP.

QUESTION NO. 78

After expiry of the lease, the property reverts to the lessor. If the net market rent is ₹82,000 per month and the perpetuity capitalization rate is 8%, the reversionary value at the end of Year 8 and its present value are approximately:

OPTION 1: ₹1,23,00,000; present value ≈ ₹66.41 lakh
OPTION 2: ₹1,32,00,000; present value ≈ ₹71.32 lakh
OPTION 3: ₹98,40,000; present value ≈ ₹53.00 lakh
OPTION 4: ₹82,00,000; present value ≈ ₹44.20 lakh

CORRECT ANSWER: OPTION 1

EXPLANATION:

Net monthly market rent:

₹90,000 – ₹8,000 = ₹82,000

Annual net market rent:

$₹82,000×12=₹9,84,000₹82,000\times12=₹9,84,000$

Capitalised reversion value at 8%:

$₹9,84,000/0.08=₹1,23,00,000₹9,84,000/0.08 =₹1,23,00,000$

This is the value at the end of Year 8.

Now discount it for 8 years at 8%:

$PV=₹1,23,00,000(1.08)8PV=\frac{₹1,23,00,000}{(1.08)^8}$ $PV≈₹66.4 lakhPV\approx₹66.4\text{ lakh}$

Therefore, Option 1 is correct.

Important correction: The original working incorrectly used ₹88,000/month instead of the stated ₹82,000/month. That is why ₹71,31,549 appeared in the original material.

QUESTION NO. 79

For mortgage valuation, a registered valuer may additionally be required to provide:

OPTION 1: Gross Development Value in every case
OPTION 2: Forced Sale Value (FSV), where required, in addition to Market Value
OPTION 3: Agricultural land value
OPTION 4: Historical construction cost only

CORRECT ANSWER: OPTION 2

EXPLANATION:
Mortgage/lending assignments commonly require Market Value and may additionally require a lending-specific value such as Forced Sale Value, depending on the lender’s instructions and applicable valuation standards.

QUESTION NO. 80

The fact that passing rent of ₹60,000 per month is lower than market rent of ₹90,000 per month means that the lessor’s interest has:

OPTION 1: A reversionary potential because market rent is higher than the passing rent
OPTION 2: No value
OPTION 3: No mortgage eligibility
OPTION 4: To be valued only by replacement cost

CORRECT ANSWER: OPTION 1

EXPLANATION:
The existing lease produces rent below current market rent. This creates a reversionary potential because, on expiry of the lease, the property may potentially generate the higher market rent, subject to market conditions and lease terms.

CASE STUDY II

Petrol Pump – Profit Method

Given:

Fuel sales = 1,20,000 litres/month
Net margin = ₹1.50/litre
Convenience-store net profit = ₹40,000/month
Capitalization rate = 12%

QUESTION NO. 81

The annual net profit from fuel sales alone is:

OPTION 1: ₹18,00,000
OPTION 2: ₹21,60,000
OPTION 3: ₹14,40,000
OPTION 4: ₹12,00,000

CORRECT ANSWER: OPTION 2 – ₹21,60,000

EXPLANATION:

Monthly fuel profit:

$1,20,000×₹1.50=₹1,80,0001,20,000\times₹1.50=₹1,80,000$

Annual fuel profit:

$₹1,80,000×12=₹21,60,000₹1,80,000\times12 =₹21,60,000$

QUESTION NO. 82

The total annual net profit from fuel sales and the convenience store is:

OPTION 1: ₹20,40,000
OPTION 2: ₹25,00,000
OPTION 3: ₹18,40,000
OPTION 4: ₹26,40,000

CORRECT ANSWER: OPTION 4 – ₹26,40,000

EXPLANATION:

Annual fuel profit:

₹21,60,000

Annual convenience-store profit:

$₹40,000×12=₹4,80,000₹40,000\times12=₹4,80,000$

Total annual net profit:

$₹21,60,000+₹4,80,000=₹26,40,000₹21,60,000+₹4,80,000 =₹26,40,000$

QUESTION NO. 83

Using the profit method and a capitalization rate of 12%, the capital value is:

OPTION 1: ₹2,20,00,000
OPTION 2: ₹1,86,66,667
OPTION 3: ₹2,04,00,000
OPTION 4: ₹1,53,33,333

CORRECT ANSWER: OPTION 1 – ₹2,20,00,000

EXPLANATION:

$Capital Value=Net Annual ProfitCapitalization RateCapital\ Value=\frac{Net\ Annual\ Profit}{Capitalization\ Rate}$ $=₹26,40,0000.12=\frac{₹26,40,000}{0.12}$ $=₹2,20,00,000=₹2,20,00,000$

Therefore:

Capital Value = ₹2.20 crore

QUESTION NO. 84

The profit method is particularly suitable for petrol pumps because:

OPTION 1: Comparable sales are always abundant
OPTION 2: Value is closely linked to the trading potential and profitability of the business conducted from the property
OPTION 3: Cost approach is always higher
OPTION 4: Government fixes the market value of all petrol pumps

CORRECT ANSWER: OPTION 2

EXPLANATION:
A petrol pump is a specialised trading property. Its value is influenced substantially by turnover, location, trading potential, margins and profitability. Hence, the profit method can be appropriate where reliable profit data is available.

CASE STUDY III

Market Comparison Approach

Given:

Subject property = 2,000 sq. ft.

Comp A = ₹8,200/sq. ft.; 6 months old
Comp B = ₹7,800/sq. ft.; 1 year old
Comp C = ₹8,000/sq. ft.; 3 months old
Time adjustment = 5% p.a.
Location adjustment for B = +3%

QUESTION NO. 85

After applying a 5% annual time adjustment for 6 months to Comp A, the adjusted rate is approximately:

OPTION 1: ₹8,405/sq. ft.
OPTION 2: ₹8,000/sq. ft.
OPTION 3: ₹8,610/sq. ft.
OPTION 4: ₹8,500/sq. ft.

CORRECT ANSWER: OPTION 1 – ₹8,405/sq. ft.

EXPLANATION:

Six-month adjustment:

$5%×612=2.5%5\%\times\frac{6}{12}=2.5\%$

Adjusted rate:

$₹8,200×1.025₹8,200\times1.025$ $=₹8,405/sq.ft.=₹8,405/sq.ft.$

QUESTION NO. 86

After applying a 5% annual time adjustment for one year and a +3% location adjustment to Comp B, the adjusted rate is approximately:

OPTION 1: ₹8,436/sq. ft.
OPTION 2: ₹8,190/sq. ft.
OPTION 3: ₹8,736/sq. ft.
OPTION 4: ₹8,580/sq. ft.

CORRECT ANSWER: OPTION 1 – Approximately ₹8,436/sq. ft.

EXPLANATION:

Time adjustment:

$₹7,800×1.05=₹8,190₹7,800\times1.05=₹8,190$

Location adjustment of +3%:

$₹8,190×1.03₹8,190\times1.03$ $=₹8,435.70=₹8,435.70$

Therefore:

Adjusted rate ≈ ₹8,436/sq.ft.

The earlier answer of ₹8,424 is mathematically incorrect because:

$1.05×1.03=1.08151.05\times1.03=1.0815$

and:

$₹7,800×1.0815=₹8,435.70₹7,800\times1.0815=₹8,435.70$

QUESTION NO. 87

After adjusting all three comparable rates and taking their simple average, the indicated value of the 2,000 sq. ft. subject property is closest to:

OPTION 1: ₹1,68,00,000
OPTION 2: ₹1,72,00,000
OPTION 3: ₹1,60,00,000
OPTION 4: ₹1,76,00,000

CORRECT ANSWER: OPTION 1 – ₹1,68,00,000

EXPLANATION: