Personal Finance and Investments - Chapter 17 Quiz

MULTIPLE CHOICE:

By the time you turn 60, a large percentage of your net worth will likely consist of

a) Equity in your primary residence

b) Equity in your vacation home

c) Equity in rental property

d) Equity in an REIT

a) Equity in your primary residence

MULTIPLE CHOICE:

Direct real estate investments include

a) Limited partnerships

b) Single family dwellings

c) Syndicates

d) REITs

b) Single family dwellings

MULTIPLE CHOICE:

Which type of REIT invests directly in properties?

a) Equity

b) Mortgage

c) Hybrid

d) Preferred

a) Equity

MULTIPLE CHOICE:

You have net passive activity losses of $10,000 related to an investment in a real estate partnership. Which statement is true with respect to your federal tax return?

a) Net passive activity losses are fully deductible.

b) Net passive activity losses are fully deductible if your AGI is less than $100,000.

c) Net passive activity losses can never be deducted.

d) Net passive activity losses are carried forward to future tax returns and available to offset future passive activity gains.

d) Net passive activity losses are carried forward to future tax returns and available to offset future passive activity gains.

MULTIPLE CHOICE

Which of the following is a disadvantage of direct investments in real estate, such as rental property?

a) The investment can be illiquid

b) It does not provide a hedge against inflation

c) It does not allow for financial leverage

d) It has a short depreciation period

a) The investment can be illiquid

MULTIPLE CHOICE:

Gold prices, which generally move in the opposite direction of the S&P 500 stock index, are more likely to rise

a) During periods of low inflation.

b) During periods when the FED is lowering interest rates.

c) During wars or other periods of significant geopolitical uncertainty.

d) During Republican administrations.

c) During wars or other periods of significant geopolitical uncertainty.

MULTIPLE CHOICE

You buy a property for $200,000 in cash and sell it at the end of the year for $240,000. What is your gain and return on investment?

a) $240,000 and 200%

b) $ 40,000 and 20%

c) $200,000 and 100%

d) $ 40,000 and 10%

b) $ 40,000 and 20%

Selling price - original price = gain

$240,000 - $200,000 = $40,000

Gain / paid price = return on investment

$40,000 / $200,000 = 20%

MULTIPLE CHOICE

Let's see how leverage works in real estate investments. If you compare the answer on this question to the previous question where there was no leverage, you will quickly see why people can make so much money in real estate by taking some big risks. You buy a property for $200,000. You pay $20,000 in cash and borrow $180,000 interest free! At the end of the year, you sell the property for $240,000. What is your gain and return on investment?

a) $40,000 and 200%

b) $40,000 and 20%

c) $200,000 and 1000%

d) $240,000 and 1100%

a) $40,000 and 200%

Selling price - original price = gain

$240,000 - $200,000 = $40,000

Gain / paid price = return on investment

$40,000 / $20,000 = 20%

MULTIPLE CHOICE:

Refer to the web work.

Which of the following statements is true when comparing the REIT benchmark index best reflected in VGSLX against the returns on SPG for a 5 year period?

a) The index exceeded SPG returns

b) The returns for SPG and the index were about the same

c) The returns for SPG exceeded the index

a) The index exceeded SPG returns

MULTIPLE CHOICE:

Refer to the web work.

Which of the following statements is true when comparing the returns for SPG vs. CPT over a 5 year period?

a) SPG returns were higher

b) SPG and CPT had about the same returns

c) CPT returns were higher

c) CPT returns were higher