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LOS d, (Part 1): Describe the forms of real estate investment. ffice ffice" />
Q1. Investors can diversify their direct real estate holdings through all of the following vehicles EXCEPT:
A) co-operative shares.
B) commingled funds.
C) limited partnerships.
Correct answer is A)
Real estate co-operatives are generally a tool with which multiple owners can purchase shares in a single building or complex. This strategy spreads out risk among many investors but doesn’t offer much in the way of diversification for a single investor. Commingled funds and limited partnerships typically allow investors to spread their bets either geographically or through different property types
Q2. Mortgages are considered to be a form of real estate investment because:
A) if the borrower defaults on the loan, the lender may end up owning the property.
B) the investor receives a constant stream of cash flows.
C) the borrower will own the property at the end of the loan term.
Correct answer is A)
It is true that the borrower will own the property if all loan terms are met, but the question is stated in terms of the mortgage lender, not the borrower. The investor anticipates a constant stream of cash flows, similar to other fixed income investments, but is also subject to defaults as well as prepayments. If the borrower defaults on the terms of the loan, the property will revert back to the lender, and this exposure is the reason why mortgages are considered a real estate investment.
Q3. Which of the following is least likely to be a form of real estate investment?
A) Property insurance.
B) Aggregation vehicles.
C) Leveraged equity position.
Correct answer is A)
Property insurance is not considered a category of real estate investment because the underlying real estate does not revert to the insurer if the property holder allows the policy to lapse. A leveraged equity position and aggregation vehicles such as real estate investment trusts are each forms of real estate investment.
Q4. Demand for real estate is a function of all of the following factors EXCEPT?
A) Competitive properties.
B) Population characteristics of the community.
C) The terms and conditions of mortgage financing.
Correct answer is A)
This is a determinant of the supply of real estate property. Both remaining choices are determinants of demand.
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发表于 2009-2-28 15:08
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