Question 1

The tax laws prevent real estate investors from taking losses in excess of the actual amounts they invest.

Accepted Answer

A) True 
 B)False

Question 2

The tax shelter aspect of a real estate syndicate:

Accepted Answer

A)   no longer exists.
B)   is strengthened by the Tax Reform Act of 1986.
C)   has remained unchanged since 1980.
D)   improves the liquidity of real estate syndicates.
E)   is available only to limited partners.F) B) and D)
G) B) and C)

Question 3

The primary reason people buy a vacation home is:

Accepted Answer

A)   to use as a family vacation retreat.
B)   for tax reasons.
C)   for rental income.
D)   for their grown children to live in.
E)   to eventually use it as their primary residence.F) B) and C)
G) D) and E)

Question 4

Presently you are required to use which method of depreciation in real estate investments?

Accepted Answer

A)   Sum-of-the-digits
B)   Straight-line
C)   Rule of 78s
D)   Last In First Out (LIFO) 
E)   First In First Out (FIFO) F) None of the above
G) C) and D)

Question 5

It takes just a few days to sell your limited partnership shares.

Accepted Answer

A) True 
 B)False

Question 6

In general, the price of gold:

Accepted Answer

A)   is stable.
B)   fluctuates daily.
C)   changes monthly.
D)   is unaffected by political upheavals.
E)   is unaffected by economic conditions.F) A) and C)
G) B) and E)

Question 7

One of the advantages of being a limited partner in a real estate investment venture is that you have ____________ liability.

Accepted Answer

A)   no financial
B)   unlimited financial
C)   product
D)   limited financial
E)   impliedF) None of the above
G) A) and E)

Question 8

Increasing interest rates in the economy cause gold prices to:

Accepted Answer

A)   skyrocket.
B)   increase moderately.
C)   remain stable.
D)   decline.
E)   change, but the direction of the change cannot be predicted.F) B) and D)
G) All of the above

Question 9

When you purchase precious stones, it is difficult to determine whether you are getting a good stone.

Accepted Answer

A) True 
 B)False

Question 10

Collecting for investment purposes is very similar to collecting as a hobby.

Accepted Answer

A) True 
 B)False

Question 11

REITs, Ginnie Maes, Freddie Macs, and syndicates do not provide any diversification.

Accepted Answer

A) True 
 B)False

Question 12

High interest rates depress gold prices because they make it very expensive to carry gold as an investment.

Accepted Answer

A) True 
 B)False

Question 13

Federal law requires REITs to:

Accepted Answer

A)   distribute at least 90 percent of their earnings to shareholders.
B)   engage in short-term holdings of real estate.
C)   register with the U.S. Department of Housing & Urban Development.
D)   reinvest at least 50 percent of their income in rental properties.
E)   have at least 500 shareholders.F) C) and E)
G) C) and D)

Question 14

The Tax Reform Act of 1986 adversely affected the investment potential of real estate syndicates.

Accepted Answer

A) True 
 B)False

Question 15

Which type of REIT invests directly in properties?

Accepted Answer

A)   Compound
B)   Equity
C)   Mortgage
D)   Hybrid
E)   SimpleF) A) and E)
G) B) and E)

Question 16

You can avoid assaying problems by investing in:

Accepted Answer

A)   gold.
B)   gold wafers.
C)   gold bars.
D)   gold bullion.
E)   gold bullion coins.F) B) and D)
G) B) and E)

Question 17

A REIT is a firm that pools investor funds and invests them in real estate or uses them to make what kind of loans?

Accepted Answer

A)   New car loans
B)   Construction loans
C)   Mortgage loans
D)   Both construction and mortgage loans
E)   Car, construction, and mortgage loansF) A) and E)
G) A) and D)

Question 18

Many investors buy land with the intention of subdividing it.

Accepted Answer

A) True 
 B)False

Question 19

Collectibles may be difficult to sell at the right price on short notice.

Accepted Answer

A) True 
 B)False

Question 20

Diane Chambers buys an apartment building for $2 million. Which one of the following exhibits the highest degree of financial leverage?

Accepted Answer

A)   $500,000 down payment and mortgage of $1,500,000
B)   $250,000 down payment and loan of $1,750,000
C)   $150,000 down payment and loan of $1,850,000
D)   $100,000 down payment and loan of $1,900,000
E)   $1 million down payment and loan of $1 millionF) D) and E)
G) C) and E)

Exam 17: Investing in Real Estate and Other Investment Alternatives

The Tax Reform Act of 1986 adversely affected the investment potential of real estate syndicates.

Correct AnswerverifiedShow Answer

Collecting for investment purposes is very similar to collecting as a hobby.

Correct AnswerverifiedShow Answer

High interest rates depress gold prices because they make it very expensive to carry gold as an investment.

Correct AnswerverifiedShow Answer

One of the advantages of being a limited partner in a real estate investment venture is that you have ____________ liability.

Correct AnswerverifiedShow Answer

Increasing interest rates in the economy cause gold prices to:

Correct AnswerverifiedShow Answer

You can avoid assaying problems by investing in:

Correct AnswerverifiedShow Answer

The tax laws prevent real estate investors from taking losses in excess of the actual amounts they invest.

Correct AnswerverifiedShow Answer

Which type of REIT invests directly in properties?

Correct AnswerverifiedShow Answer

The primary reason people buy a vacation home is:

Correct AnswerverifiedShow Answer

Presently you are required to use which method of depreciation in real estate investments?

Correct AnswerverifiedShow Answer

The tax shelter aspect of a real estate syndicate:

Correct AnswerverifiedShow Answer

When you purchase precious stones, it is difficult to determine whether you are getting a good stone.

Correct AnswerverifiedShow Answer

Diane Chambers buys an apartment building for $2 million. Which one of the following exhibits the highest degree of financial leverage?

Correct AnswerverifiedShow Answer

A REIT is a firm that pools investor funds and invests them in real estate or uses them to make what kind of loans?

Correct AnswerverifiedShow Answer

Federal law requires REITs to:

Correct AnswerverifiedShow Answer

Collectibles may be difficult to sell at the right price on short notice.

Correct AnswerverifiedShow Answer

It takes just a few days to sell your limited partnership shares.

Correct AnswerverifiedShow Answer

Many investors buy land with the intention of subdividing it.

Correct AnswerverifiedShow Answer

REITs, Ginnie Maes, Freddie Macs, and syndicates do not provide any diversification.

Correct AnswerverifiedShow Answer

In general, the price of gold:

Correct AnswerverifiedShow Answer

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