Tuesday, April 5, 2011

Chapter 9 Questions: Cheyenne Ison

1. The risk that the purchasing power of investment incomes and values does not keep up with the cost of other goods and services is known as:
A. Financial Risk
B. Liquidity Risk
C. Management Risk
D. Inflation Risk
Answer is D- Inflation risk

2. The likelihood of an occurrence of an unwanted event is known as:
A: Opportunity Cost
B: Risk
C: Cash Flow
D: Market Risk

Answer is B-Risk

3. The increase in asset value over a certain period is known as:
A: Tax shelter
B: Appreciation
C: Depreciation
D: Adjusted Basis

Answer is: B- Appreciation

1. The difference between the return on the underlying assets and the cost of borrowed funds is known as Spread.


2. The reduction or amortization of the mortgage balance over time is known as Leverage.

Answer: False- Known as Mortgage Reduction

3. Investing in a variety of assets to spread risk and hopefully avoid large losses is known as pride of ownership.

Answer: False-known as diversification

4. A psychic benefit is a perk to owning real property that is difficult to quantify.

Answer: True

5. An oligopoly is one supplier in a particular market that has control over market prices since there is no competition.

Answer: False- Known as a Monopoly

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