Tuesday, March 22, 2011

Chapter 9 Questions

1. Liquidity risk is

A. The risk that an investor cannot convert an investment to cash
B. the risk that an investor will not be able to pay a promised debt
C. the risk that purchasing power of investment incomes does not keep up with the cost of goods and services
D.the risk of running of running out of liquids

2. Which of the following are benefits of investing in real estate

A. Leverage
B. Psychic Perks
C. cash flow
D. All of the above

3. The increase in asset value over a certain period is called

A. Tax Shelter
B. Cash Flow
C. Appreciation

4. T/F Sinkholes are covered in general property insurance

5. T/F Psychic benefits of owning property are hard to quantify

6. T/F Investing in a variety of assets to spread risk and avoid large losses is called diversification

7.T/F Leverage is the difference between the return on the underlying assets and the cost of borrowed funds

8. T/F A 1031 exchange defers capital gains taxes on like kind exchanges

1.A, 2.D, 3.C, 4. F, 5.T, 6.T, 7.F, 8.T

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