General Knowledge · Banking and Finance
When evaluating an urban residential asset portfolio for a mortgage loan, why might a bank prefer the Cost Approach over the Income Approach under volatile market conditions?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Land values and structural values can never be accurately separated under the Income Approach.
- 2The Cost Approach entirely ignores the age and physical condition of the property.
- 3The Income Approach is prohibited by regulatory guidelines for properties older than 10 years.
- 4It accounts for the current market value of land and the depreciated replacement cost of the structure, providing a stable baseline.✓
Correct answer
It accounts for the current market value of land and the depreciated replacement cost of the structure, providing a stable baseline.
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