California Real Estate Practice Exam 2026 – 400 Free Practice Questions to Pass the Exam

The cap rate is calculated by dividing the net operating income (NOI) by the property value. The cap rate represents the potential return on investment for the property. In this scenario, the current cap rate is 10%, which means the property value is $550,000. If the cap rate increases to 11%, the new property value would be calculated by dividing the NOI of $55,000 by the new cap rate of 11%. This equals $500,000, which is a decrease in property value of $50,000. Therefore, option A is the correct answer.

Options B, C, and D are incorrect because they do not accurately reflect the decrease in property value when the cap rate increases. Option B is only a decrease of $20,000, Option C is only a decrease of $5,000, and Option D suggests no decrease in property value. These options do not take into account the relationship between cap rate and property value.