Test Bank + Answers Ch17 Investing in Real Estate and Other

Personal Finance, 13e (Kapoor)

Chapter 17 Investing in Real Estate and Other Investment Alternatives

1) In a direct real estate investment, the investor holds legal title to the property.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

2) With an indirect real estate investment, the investors appoint a trustee to hold legal title on behalf of all the investors in the group.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

3) Limited partnerships and syndicates are examples of direct real estate investment.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

4) People primarily buy a vacation home for tax reasons according to one certified public accountant.

Difficulty: 1 Easy

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

6) Land purchased with the intent of subdividing it is speculative, because it involves many risks.

Difficulty: 1 Easy

Topic: Real estate investments and considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

7) Indirect real estate investments include investing in real estate syndicates, REITs, and participation certificates.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

8) Ginnie Maes are backed by the full faith and credit of the Federal Government.

Difficulty: 2 Medium

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

9) A passive activity is a business or trade in which you do not materially participate, such as rental activity.

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

10) Passive loss is the total amount of losses from a passive activity minus the total income from the passive activity.

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

11) Many investors buy land with the intention of subdividing it.

Difficulty: 1 Easy

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

12) Real estate investment trusts are government-owned real estate companies.

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

14) Real estate investment trusts are required by federal law to have at least 500 shareholders.

Difficulty: 3 Hard

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

15) Real estate investment trusts must distribute at least 90 percent of their taxable annual earnings to shareholders.

Difficulty: 3 Hard

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

16) The limited partnership is formed by a limited partner, who has unlimited liability for its debts.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

17) A REIT is similar to a mutual fund or an investment company, and it trades on stock exchanges or over-the-counter.

Difficulty: 1 Easy

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

18) There are three types of REITs: equity REITs, mortgage REITs, and hybrid REITs.

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

19) Federal law requires that no more than half the shares in a REIT may be owned by 15 or fewer people.

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

21) First and second mortgages may potentially provide relatively high rates of return due to their special risk characteristics.

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

22) One needs at least $25,000 to indirectly invest in participation certificates.

Difficulty: 2 Medium

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

23) Ginnie Maes and Freddie Macs are guaranteed by agencies closely tied to the federal government, making them as secure as U.S. Treasury bonds and notes.

Difficulty: 2 Medium

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

24) If you want a risk-proof real estate investment, participation certificates are for you.

Difficulty: 1 Easy

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

25) Direct real estate investments include single-family dwellings, duplexes, apartments, undeveloped land, and commercial property.

Difficulty: 3 Hard

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

26) Housing will continue to be a not-so-liquid investment that promises steady returns over time.

Difficulty: 2 Medium

Topic: Liquidity

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

27) Commercial property refers to land and buildings that produce lease or rental income.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

28) Investment in land usually produces considerable cash flow.

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

29) A REIT pools investor funds and invests them in real estate or uses them to make construction or mortgage loans.

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

30) A REIT must invest all of its assets in real estate according to federal law.

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

31) A REIT may engage in speculative, short-term holding of real estate for the purpose of selling it for quick profits.

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

32) General partners in a real estate limited partnership have unlimited liability.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

33) You can gain entry to a shopping center investment by investing $5,000 in a limited partnership.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

34) If you are a limited partner, you are generally liable for losses beyond your initial investment.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Debt financing

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

36) A limited partner cannot take part in the management of the partnership.

Difficulty: 3 Hard

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

37) Financial leverage is a disadvantage when property values and incomes are rising.

Difficulty: 3 Hard

Topic: Debt financing

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

38) Financial leverage enables you to acquire a more expensive property than you could on your own.

Difficulty: 2 Medium

Topic: Debt financing

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

39) The tax shelter aspect of real estate syndicates no longer exists due to the Tax Reform Act of 1986.

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Liquidity

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

41) The percent return on a real estate investment equals net profit divided by the amount invested.

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

42) Diversification in direct real estate investment is difficult because of the large size of most real estate projects.

Difficulty: 1 Easy

Topic: Real estate investment considerations

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

43) It may take months to sell commercial property or limited partnership shares.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

44) During deflationary or recessionary periods, the values of real estate investments generally increase.

Difficulty: 3 Hard

Topic: Returns on real estate investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

46) Gross profit on a real estate transaction equals the selling price minus the purchase price.

Difficulty: 1 Easy

Topic: Returns on real estate investments

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

47) Today, real estate investors must use accelerated depreciation methods to recover the costs.

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

51) You can avoid storage and assaying problems by investing in gold bullion coins.

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

54) Easing of international tensions or disinflation causes a decline in gold prices.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

55) The price of gold is subject to daily fluctuations.

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

56) The basic unit of gold bullion is one troy ounce.

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

57) On small gold bars, gold dealers and banks add a five to eight percent premium over the pure gold bullion value.

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

58) Gold bullion poses storage problems.

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

59) The first gold bullion coin ever produced by the U.S. government was issued in 2001.

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

61) You may invest in gold by purchasing the common stocks of gold mining companies.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

62) Investments in silver, platinum, palladium, and rhodium are not used as a hedge against inflation.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

63) Unlike stocks and bonds, precious metals sitting in vaults earn no income.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

66) Prices of collectibles aren't necessarily cheaper on the web (internet), but it's much easier to compare them.

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

67) Most REITs specialize in one property type only, such as shopping malls, timberlands, or self-storage facilities.

Difficulty: 3 Hard

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

68) Which one of the following is not required of a REIT by federal law?

A) Distribute at least 90 percent of the taxable annual earnings to shareholders

B) Hire independent real estate professionals to perform certain management activities

C) Have at least 100 shareholders with no more than half of all shares owned by 5 or fewer people

D) Engage in only speculative, short-term holdings of real estate for quick profits

E) Invest at least 75 percent of the total assets in real estate

Difficulty: 3 Hard

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

69) Real estate investments are classified as:

A) participating or nonparticipating.

B) common or preferred.

C) cumulative or noncumulative.

D) direct or indirect.

E) conservative or risky.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

70) An example of an indirect real estate investment is a:

A) single family dwelling.

B) duplex.

C) apartment.

D) undeveloped land.

E) mortgage pool.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

71) An example of a direct real estate investment is a:

A) limited partnership.

B) single-family dwelling.

C) real estate syndicate.

D) real estate investment trust.

E) mortgage pool.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

72) The median price of existing homes:

A) has increased over the past 30 years, thereby acting as a hedge against inflation.

B) has risen less than the Consumer Price Index.

C) always increases in value.

D) tends to be countercyclical, thereby acting as a hedge against the business cycle.

E) remains constant over time.

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

73) If you have a vacation home, the after-tax cost of owning it since 1987 has:

A) risen.

B) remained unchanged.

C) declined.

D) equaled annual cost of living changes.

E) equaled the annual inflation rate.

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

74) Aside from a home, the real property investment most widely favored by the small investor is:

A) a post office building.

B) land.

C) a large apartment building with 100 or more apartments.

D) a condominium.

E) the duplex, fourplex, or small apartment building.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

75) Which type of REIT owns and operates income-producing real estate?

A) Compound

B) Equity

C) Mortgage

D) Hybrid

E) Simple

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

76) Which type of REIT pools money to invest in new shopping malls or self-storage facilities for the sole purpose of collecting rent?

A) Mortgage

B) Compound

C) Hybrid

D) Simple

E) Equity

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

77) About 90% of REITs are ________ REITs.

A) equity

B) mortgage

C) hybrid

D) participation

E) government

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

78) In what type of real estate investment do you assume the role of a mortgage or student loan lender receiving interest and principal by check each month?

A) Real estate investment trusts

B) Real estate limited partnerships

C) Participation certificates

D) Real estate syndicates

E) Post office buildings

Difficulty: 3 Hard

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

79) In what type of real estate investment does the investor not hold legal title to the property?

A) Vacation homes

B) Undeveloped land

C) Apartments

D) Direct investment

E) Indirect investment

Difficulty: 3 Hard

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

80) An example of an indirect real estate investment is:

A) a single-family home.

B) a duplex.

C) a real estate investment trust.

D) undeveloped land.

E) an apartment building.

Difficulty: 3 Hard

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

81) REITs, Ginnie Maes, and Freddie Macs are examples of ________ real estate investments.

A) direct

B) indirect

C) low yield

D) risky

E) speculative

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

A) Direct investment in real estate

B) Indirect investment in real estate

C) Equity REIT

D) Participation certificate

E) Mortgage REIT

Difficulty: 3 Hard

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

83) Owen Cartwright has joined a real estate syndicate that bought an office building in downtown Orlando, Florida. What type of investment does he hold?

A) Direct investment in real estate

B) Indirect investment in real estate

C) Equity REIT

D) Participation certificate

E) Mortgage REIT

Difficulty: 3 Hard

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

84) Which of the following is a true statement regarding commercial property?

A) Rental property expenses do not include mortgage interest.

B) Many investors acquire large rental properties initially and then trade down to smaller units.

C) Rental property expenses are not limited for tax purposes.

D) Rental property expenses are treated as a passive loss once they exceed rental income.

E) A passive activity is a business you materially participate in.

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

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) Vacation home

Difficulty: 3 Hard

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

86) Andrea Mitchell has joined a real estate syndicate. The syndicate she belongs to was formed by one individual who sold participation units to Andrea and several others. The individual who sold the participation units has unlimited liability and manages the property. Andrea and the others can only lose their initial investment. What type of real estate syndicate has Andrea joined?

A) One organized as a corporation

B) Limited partnership

C) Trust

D) REIT

E) Real estate mutual fund

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

87) Jeffery Davids has invested in something that acts like a mutual fund and that invests in hospitals all over the country. He knows there are federal laws that require this type of investment to distribute at least 90 percent of the income to shareholders and that requires there be at least 100 shareholders. What type of investment has Jefferson made?

A) Foreclosure

B) REIT

C) Limited partnership

D) Participation certificate

E) Direct investment

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

88) Harrison Ford has invested in something that acts like a mutual fund and that derives income from interest on loans to real estate owners. He knows there are federal laws that require this type of investment to refrain from engaging in speculative, short-term holding of real estate to sell for quick profits. What type of investment has Harrison made?

A) Limited partnership

B) Equity REIT

C) Mortgage REIT

D) Hybrid REIT

E) Participation certificate

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

89) David Harris has invested in something that acts like a mutual fund and that invests in both mortgage loans and real estate operating companies. This investment trades on the New York Stock Exchange. What type of investment has David made?

A) Limited partnership

B) Equity REIT

C) Mortgage REIT

D) Hybrid REIT

E) Participation certificate

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

90) Hal Lindon has an equity investment in a pool of student loans that have been purchased by Sallie Mae. What type of investment is this?

A) Limited partnership

B) Direct

C) Mortgage REIT

D) Hybrid REIT

E) Participation certificate

Difficulty: 2 Medium

Topic: Real estate equity securities

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

91) Which of the following is an investment where a trustee holds legal title to the investment?

A) Commercial property

B) Undeveloped land

C) Single-family dwelling

D) Duplexes

E) Syndicates

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

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 million

Difficulty: 3 Hard

Topic: Debt financing

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

93) Real property equity investments are a possible hedge against:

A) deflation.

B) disinflation.

C) inflation.

D) recession.

E) unemployment.

Difficulty: 2 Medium

Topic: Real estate equity securities

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

94) One of the advantages of being a limited partner in a real estate investment venture is that you have ________ liability, which means you are not liable for losses beyond your initial investment.

A) no financial

B) unlimited

C) product

D) limited

E) implied

Difficulty: 3 Hard

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

95) General partners in a real estate investment venture have liability for ________ financial losses.

A) none of the

B) all of the

C) some of the

D) only exceptional

E) implied

Difficulty: 1 Easy

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

96) Which of the following is an advantage of investing in limited partnerships, REITs, mortgages, or participation certificates?

A) A possible hedge against inflation

B) Easy entry

C) No management concerns

D) Financial leverage

E) All of these

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

97) Real property equity investments ________ provide protection against purchasing power risk.

A) usually

B) always

C) never

D) without exception

E) at no time in the past or future will

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

98) Real estate investments provide ________ protection against inflation.

A) consistent

B) unusual

C) exceptional

D) some

E) no

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

99) Thousands of developers, lenders, and investors were victims of deflation in commercial real estate beginning in the:

A) 1960s.

B) 1980s.

C) late 1970s.

D) early 1970s.

E) 1990s.

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

100) Illiquidity in real estate means that:

A) you can quickly find someone who is willing to pay full value to purchase the property.

B) you don't have a water well on the property.

C) you cannot quickly sell the property at the market price.

D) you don't have financial leverage.

E) there is an efficient market for the property.

Difficulty: 2 Medium

Topic: Liquidity

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

101) Diversification in direct real estate investments is:

A) difficult.

B) easy.

C) always available.

D) limited because of the small size of most real estate projects.

E) never available.

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

102) Which one of the following real estate investments provides various levels of diversification?

A) REITs

B) Ginnie Maes

C) Freddie Macs

D) Other syndicates

E) All of these

Difficulty: 3 Hard

Topic: Real estate investment considerations

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

103) The ability of investors to use their real estate losses to offset income from wages, salaries, dividends, and interest is an aspect of a real estate syndicate that:

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.

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

A) Sum-of-the-digits

B) Straight-line

C) Rule of 78s

D) ACRS

E) First In First Out

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

105) For residential real estate investments, the depreciation period is ________ years.

A) 7 1/2

B) 17 1/2

C) 20 1/2

D) 27 1/2

E) 31 1/2

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

106) For all types of real estate investments, except residential ones, the depreciation period is ________ years.

A) 7 1/2

B) 17 1/2

C) 20 1/2

D) 27 1/2

E) 31 1/2

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

107) The investment tax credit has been eliminated entirely for all types of real estate except:

A) low-income housing projects.

B) single-family dwellings.

C) shopping centers.

D) raw land.

E) developed land.

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

108) Which of the following is a possible disadvantage of real estate investments?

A) Lack of involvement in property maintenance

B) Hedge against inflation

C) Illiquidity

D) Lack of financial risk

E) Easy entry

Difficulty: 2 Medium

Topic: Liquidity

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

109) Which of the following can be a management problem when investing directly in real estate?

A) Finding reliable tenants

B) Inability to sell your interest in a limited partnership

C) Disagreements among syndicate members

D) Limited financial liability

E) Financial planners do not support buying small properties

Difficulty: 2 Medium

Topic: Real estate rentals

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

110) During which of the following economic periods is the price of a precious metal, such as rhodium, silver or platinum, likely to increase? 

A) Recession

B) Depression

C) Peace time

D) Deflationary

E) Inflationary

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

111) Investors buy precious metals as a safe haven during:

A) a recession.

B) a depression.

C) an economic upheaval.

D) deflation.

E) political stability.

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

112) Easing of international tensions or disinflation causes gold prices to:

A) skyrocket.

B) increase moderately.

C) remain stable.

D) decline.

E) change, but the direction of the change cannot be predicted.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

113) High interest rates in the economy cause gold prices to:

A) skyrocket.

B) increase moderately.

C) remain stable.

D) decline.

E) change, but the direction of the change cannot be predicted.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

114) In general, the price of gold:

A) is stable.

B) fluctuates daily.

C) changes monthly.

D) is unaffected by political upheavals.

E) is unaffected by economic conditions.

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

115) The basic unit of gold bullion is one ________ of 0.995 fine gold.

A) kilogram

B) troy ounce

C) pound

D) ton

E) wafer

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

116) On larger gold bars, dealers and banks add a ________ percent premium over the pure gold bullion value.

A) 1 to 2

B) 3 to 5

C) 5 to 8

D) 6 to 7

E) 9 to 12

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

117) Popular gold bullion coins today include:

A) Australia's kangaroo nugget.

B) Canadian gold maple leaf.

C) Mexican 50 peso.

D) Chinese Panda.

E) All of these

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

118) Jeremy Fischer has just purchased 20 American eagle gold bullion coins from a broker. What type of investment does he hold?

A) Direct investment in real estate

B) Indirect investment in real estate

C) Precious metals

D) Ceramics

E) Gems

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

119) Brian Wilson has several baseball cards passed down to him from his grandfather. He is particularly proud of the signed Hank Aaron baseball card that he has. What type of investment does he hold?

A) Direct investment in real estate

B) Indirect investment in real estate

C) Precious metals

D) Collectibles

E) Gems

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

120) Lynn Roy owns three two-carat diamonds that she received from her grandmother, who did not believe in banks, stocks, or bonds. What type of investment does she hold?

A) Direct investment in real estate

B) Indirect investment in real estate

C) Precious metals

D) Collectibles

E) Precious stones

Difficulty: 1 Easy

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

121) If a gold bullion bar does not remain in the possession of the dealer or bank that sells it, what must happen before it can be resold?

A) It must be made into coins.

B) It must be pounded flat.

C) It must be reassayed.

D) It must be turned into jewelry.

E) It must be taxed.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

122) It is much easier today to find and trade in collectibles than it was in prior years. Which one of the following is primarily the reason for this?

A) Telephone

B) Web (internet)

C) Magazines

D) Plane travel

E) Automobiles

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

123) A vacation home is deemed a second home so long as you rent it for no more than ________ per year.

A) one month

B) 14 days

C) 7 days

D) 8 weeks

E) 4 weeks

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

124) What is the approximate annual depreciation for tax purposes on residential real estate purchased at a cost of $275,000?

A) $7,500

B) $20,000

C) $2,750

D) $10,000

E) $27,500

Explanation: 275,000 / 27.5 years = 10,000

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Apply

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

125) Austin has invested $25,000 as one of 10 limited partners in a large shopping center that was purchased for $800,000. The shopping center has been unsuccessful and the four general partners fear that the property could be foreclosed upon soon. What is the most Austin might lose if the project fails?

A) $80,000

B) $57,143

C) $200,000

D) $25,000

E) $20,000

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

126) An advantage of purchasing diamonds for investors is that:

A) diamonds are not easily turned into cash.

B) diamonds are small and easy to conceal.

C) diamonds are largely controlled by DeBeers Consolidated Mines of South Africa.

D) the grading of diamonds is not an exact science.

E) diamonds are typically bought at retail and sold at wholesale.

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

127) Home ownership rates are highest among those individuals in which age group?

A) Under 34

B) 35 - 44

C) 45 - 54

D) 55 - 64

E) 65 and over

Difficulty: 1 Easy

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

128) De Beers Consolidated Mines of South Africa Ltd. controls what percent of the world's supply of rough diamonds?

A) 50

B) 65

C) 75

D) 85

E) 95

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

129) In 2016, which country was the world's largest producer of gold?

A) China

B) Australia

C) U.S.

D) Russia

E) Canada

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

130) Which of the following is not a characteristic used to grade certified diamonds?

A) Weight

B) Country of origin

C) Clarity

D) Quality of cut

E) Color

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

131) The primary reason people buy a vacation home is:

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.

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

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

A) New car loans

B) Construction loans

C) Mortgage loans

D) Both construction and mortgage loans

E) Car, construction, and mortgage loans

Difficulty: 2 Medium

Topic: Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

133) The first gold bullion coin ever produced by the U.S. government was issued in what year?

A) 1963

B) 1968

C) 1975

D) 1980

E) 1986

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

134) Coin dealers, precious metals dealers, and some banks sell gold bullion in amounts ranging from ________ grams to 500 ounces or more.

A) 5

B) 10

C) 25

D) 50

E) There is no minimum order.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

135) Besides gold, other metals that are used as a hedge against inflation include the following, except:

A) silver.

B) aluminum.

C) platinum.

D) palladium.

E) rhodium.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

136) Which of the following has lessened the appeal of investing in real estate?

A) Hedge against inflation

B) Professional management

C) Financial leverage

D) Tax Reform Act of 1986

E) National Association of Realtors

Difficulty: 2 Medium

Topic: Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

137) Over the past 30 years, the median price of existing homes has increased an average of more than ________ percent every year.

A) 5

B) 6

C) 7

D) 10

E) 11

Difficulty: 3 Hard

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

138) According to the National Association of Realtors, home values nearly double every ________ years.

A) 5

B) 6

C) 7

D) 10

E) 11

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

139) Austin has invested $50,000 as one of 5 general partners in a large shopping center that was purchased for $800,000. The shopping center has been unsuccessful and the partners fear that the property could be foreclosed upon soon. What amount is Austin liable for if the project fails? 

A) $60,000

B) $18,000

C) $180,000

D) $800,000

E) $50,000

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

140) What is the approximate annual depreciation for tax purposes on other types of real estate besides residential real estate if the property was purchased at a cost of $315,000?

A) $30,000

B) $3,150

C) $15,000

D) $10,000

E) $31,500

Explanation: $315,000 / 31.5 years = $10,000

Difficulty: 3 Hard

Topic: Taxation and investments

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Apply

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

141) Which of the following do not create management problems?

A) REITs

B) Mortgages

C) Participation certificates

D) Limited partnerships

E) None of the these

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

142) Suppose you invested $20,000 of your own money and had a $80,000 mortgage with interest rate of 6.5 percent. After one year, you sell the property for $130,000. What is your gross profit?

A) $10,000

B) $90,000

C) $130,000

D) $50,000

E) $30,000

Explanation: $130,000 (selling price) − $100,000 (purchase price) = $30,000

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

143) Which of the following is produced by the U.S. Mint specially for collectors, and is usually sold in a protective display case?

A) Uncirculated bullion coins

B) Proof bullion coins

C) Small gold bars

D) Large gold bars

E) Wafers of any size

Difficulty: 3 Hard

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

144) Nowadays, gold certificates:

A) offer you a method of holding gold without taking physical delivery

B) are issued by individual banks in Germany or Switzerland that hold the metal on your behalf

C) provide a way to avoid storage and personal security problems

D) provide liquidity because you can sell portions of the holdings if needed

E) All of these

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

145) Which of the following is not a recommended way to invest in gold?

A) Purchase it from any company on the internet

B) Buy stock in a gold mining firm

C) Purchase a mutual fund that invests in gold bullion

D) Purchase bullion coins from the U.S. Mint directly

E) Buy collectible coins from coin dealers that use professional services to grade the coins

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

146) Which of the following is not a reason that precious stones like diamonds appeal to investors?

A) Small size

B) Easily sold at market value

C) Ease of concealment

D) Great durability

E) Potential hedge against inflation

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

147) Which of the following is true of collectible coin purchases?

A) Sellers always honor "buy back" offers.

B) Sellers never fail to disclose all of the fees attached to "buy back" offers.

C) These coins can always be sold at a gain on the open market if the "buy back" offer is dishonored.

D) It is a mistake to put faith in "buy back" offers.

E) It is guaranteed that you can sell your collection at a later time.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: automatic

148) What are the possible advantages and possible disadvantages of investing in real estate?

Hedge against inflation, limited financial liability, no management headaches, financial leverage.

Possible Disadvantages

Illiquidity, lack of diversification, no tax shelters, new tax law provisions.

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

149) What are 4 tips to avoid scams if you are struggling to pay your mortgage?

• Beware of anyone seeking to charge you in advance for mortgage modification services. In most cases, charging fees in advance of a mortgage modification is illegal.

• Only your mortgage company has the discretion to grant a loan modification. Therefore, no third party can guarantee or preapprove your mortgage modification application.

• Beware of individuals and companies using mail and/or phone solicitations that claim to be from your mortgage company, but insist that payments be sent to an alternate contact or address that is different from the information in your mortgage statement.

• Paying a third party to assist with your application may not improve your likelihood of receiving a mortgage modification. Beware of individuals or companies that ask you for payment, or tout their success rate. In particular, avoid any business that:

(1) pressure you to sign papers you haven't had a chance to read thoroughly or that you don't understand;

(2) offer to buy your house for cash for much lower than the selling price of similar houses in your neighborhood. 

• Beware of individuals or companies that offer money-back guarantees or insist on upfront fees and can accept payment only by cashier's check or wire transfer.

• Beware of individuals or companies that advise you to stop making your mortgage payments or discontinue contact with your mortgage company.

• Do not sign over the deed to your property to any individual or organization unless you are working directly with your mortgage company to forgive your debt.

• You can apply for mortgage assistance on your own or with free help from a HUD-approved housing counseling agency. For more information and help with your application, call a housing counselor at 888-995-HOPETM (4673). To find a HUD-approved housing counseling agency near you, access HUD's database for Foreclosure Avoidance Counseling. 

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

150) Explain the relationship between real estate syndicates and REITs.

Difficulty: 2 Medium

Topic: Real estate partnerships and syndicates; Real estate investment trusts

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

151) Explain the difference between direct and indirect investments in real estate. Give examples of each.

Difficulty: 2 Medium

Topic: Types of real estate investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

152) What advantages do real estate investments offer?

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

153) What are some possible disadvantages of real estate investments?

Difficulty: 2 Medium

Topic: Real estate investment considerations

Learning Objective: 17-03 Assess the disadvantages of real estate investments.

Bloom's: Remember

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

154) Mary Simpson bought a rental property for $100,000 cash. Later she sold the property for $130,000. What was her profit and return on this investment? 

Purchase price = $100,000

Profit = $130,000 − $100,000 = $30,000

Return on investment = $30,000 / $100,000 = 0.30 or 30%

Difficulty: 2 Medium

Topic: Returns on real estate investments

Learning Objective: 17-02 Evaluate the advantages of real estate investments.

Bloom's: Apply

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

155) Explain what factors drive up gold prices and what factors decrease gold prices.

Difficulty: 2 Medium

Topic: Other investments - alternatives, considerations, and returns

Learning Objective: 17-04 Analyze the risks and rewards of investing in precious metals, gems, and collectibles.

Bloom's: Understand

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual

156) Your parents own a vacation home and find it more difficult to spend as much time there as they once did. They are thinking about continuing to use it as a vacation retreat but also want to periodically rent it and use it as an investment. Discuss the issues they should consider when making this decision.

In that case, you can write off your mortgage interest and property tax. If you rent out the vacation home regularly, the size of your deductions is determined by whether you actively manage it and by the size of your income.

Difficulty: 2 Medium

Topic: Types of real estate investments; Taxation and investments

Learning Objective: 17-01 Identify types of real estate investments.

Bloom's: Analyze

Accessibility: Keyboard Navigation; Screen Reader Compatible

Gradable: manual