Question 1

Federal law requires REITs to have at least 20 shareholders. No more than half the shares may be owned by 15 or fewer people.

Accepted Answer

A) True 
 B)False

Question 2

Deflation in commercial real estate began sporadically in the:

Accepted Answer

A)   1960s.
B)   1980s.
C)   late 1970s.
D)   early 1970s.
E)   1990s.F) D) and E)
G) None of the above

Question 3

Perhaps the largest drawback of direct real estate investments is the absence of large, liquid, and relatively efficient markets for them.

Accepted Answer

A) True 
 B)False

Question 4

Financial leverage is the use of borrowed funds for investment purposes.

Accepted Answer

A) True 
 B)False

Question 5

Factors such as fear of war, political instability, and inflation cause gold prices to decline.

Accepted Answer

A) True 
 B)False

Question 6

Most gold brokers require a minimum order of ten bullion coins and charge a commission of at least two percent.

Accepted Answer

A) True 
 B)False

Question 7

Stuart Michelson has invested in several pieces of real estate. Which one of the properties that Stuart owns would be considered commercial real estate?

Accepted Answer

A)   4 bedroom home that he does not rent out
B)   20 acre tract of farm land that is sitting idle
C)   Fourplex that he rents to college students
D)   100 acres of land in the mountains that he hopes to subdivide and sell as residential lots
E)   All of these can be considered commercial real estate.F) B) and C)
G) C) and D)

Question 8

Which one of the following real-estate investments provides some diversification?

Accepted Answer

A)   A single-family dwelling
B)   An apartment building
C)   Raw land
D)   A second mortgage
E)   A real estate investment trust (REIT) F) B) and E)
G) C) and D)

Question 9

Jane Calvert owns a condominium at the beach which she rents out to vacationers. What type of investment does she hold?

Accepted Answer

A)   Direct investment in real estate
B)   Indirect investment in real estate
C)   Equity REIT
D)   Participation certificate
E)   Mortgage REITF) B) and C)
G) A) and B)

Question 10

Collectibles include rare coins, works of art, antiques, stamps, rare books, paintings, and other items that appeal to collectors and investors.

Accepted Answer

A) True 
 B)False

Question 11

Real estate investments are classified as:

Accepted Answer

A)   participating or nonparticipating.
B)   common or preferred.
C)   cumulative or noncumulative.
D)   direct or indirect.
E)   none of the other answers.F) A) and E)
G) A) and B)

Question 12

What is the annual depreciation for tax purposes on residential real estate purchased at a cost of $200,000?

Accepted Answer

A)   $6,349
B)   $20,000
C)   $2,750
D)   $7,273
E)   $6,667F) B) and C)
G) B) and E)

Question 13

One of the advantages of investing in limited partnerships, REITs, mortgages, or participation certificates is that you do not need to worry about:

Accepted Answer

A)   federal income taxes.
B)   state income taxes.
C)   capital gains taxes.
D)   declining property taxes.
E)   maintenance chores.F) A) and B)
G) B) and D)

Question 14

People generally buy a vacation home for tax reasons.

Accepted Answer

A) True 
 B)False

Question 15

Gold bullion poses storage problems.

Accepted Answer

A) True 
 B)False

Question 16

A participation certificate is an equity investment in a pool of mortgages that have been purchased by one of several government agencies.

Accepted Answer

A) True 
 B)False

Question 17

General partners in a real estate investment venture have ____________ liability.

Accepted Answer

A)   no financial
B)   unlimited financial
C)   limited financial
D)   express
E)   impliedF) A) and D)
G) A) and C)

Question 18

A passive activity is a business or trade in which you do not materially participate.

Accepted Answer

A) True 
 B)False

Question 19

A real estate syndicate provides professional management and unlimited liability for its members.

Accepted Answer

A) True 
 B)False

Question 20

A syndicate is a temporary association of individuals or firms, organized to perform a specific task that requires a large amount of capital.

Accepted Answer

A) True 
 B)False

Exam 17: Investing in Real Estate and Other Investment Alternatives

Deflation in commercial real estate began sporadically in the:

Correct AnswerverifiedShow Answer

Which one of the following real-estate investments provides some diversification?

Correct AnswerverifiedShow Answer

People generally buy a vacation home for tax reasons.

Correct AnswerverifiedShow Answer

Most gold brokers require a minimum order of ten bullion coins and charge a commission of at least two percent.

Correct AnswerverifiedShow Answer

A syndicate is a temporary association of individuals or firms, organized to perform a specific task that requires a large amount of capital.

Correct AnswerverifiedShow Answer

A participation certificate is an equity investment in a pool of mortgages that have been purchased by one of several government agencies.

Correct AnswerverifiedShow Answer

Federal law requires REITs to have at least 20 shareholders. No more than half the shares may be owned by 15 or fewer people.

Correct AnswerverifiedShow Answer

Real estate investments are classified as:

Correct AnswerverifiedShow Answer

Jane Calvert owns a condominium at the beach which she rents out to vacationers. What type of investment does she hold?

Correct AnswerverifiedShow Answer

Factors such as fear of war, political instability, and inflation cause gold prices to decline.

Correct AnswerverifiedShow Answer

A passive activity is a business or trade in which you do not materially participate.

Correct AnswerverifiedShow Answer

Collectibles include rare coins, works of art, antiques, stamps, rare books, paintings, and other items that appeal to collectors and investors.

Correct AnswerverifiedShow Answer

What is the annual depreciation for tax purposes on residential real estate purchased at a cost of $200,000?

Correct AnswerverifiedShow Answer

A real estate syndicate provides professional management and unlimited liability for its members.

Correct AnswerverifiedShow Answer

One of the advantages of investing in limited partnerships, REITs, mortgages, or participation certificates is that you do not need to worry about:

Correct AnswerverifiedShow Answer

General partners in a real estate investment venture have ____________ liability.

Correct AnswerverifiedShow Answer

Perhaps the largest drawback of direct real estate investments is the absence of large, liquid, and relatively efficient markets for them.

Correct AnswerverifiedShow Answer

Stuart Michelson has invested in several pieces of real estate. Which one of the properties that Stuart owns would be considered commercial real estate?

Correct AnswerverifiedShow Answer

Financial leverage is the use of borrowed funds for investment purposes.

Correct AnswerverifiedShow Answer

Gold bullion poses storage problems.

Correct AnswerverifiedShow Answer

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