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Exam 17: Investing in Real Estate and Other Investment Alternatives

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Question 51

Multiple Choice

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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

F) B) and C)
G) A) and D)

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Question 52

Multiple Choice

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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

F) A) and C)
G) A) and B)

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Question 53

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

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

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

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?

Illiquidity in real estate means that:

The price of gold is subject to daily fluctuations.

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

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?

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.

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

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

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

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

Real estate investments provide _____protection against inflation.

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

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

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

Real estate investments are classified as: