Friday, October 11, 2013

Chapter 9 Questions

1)      There is a direct relationship between risk and return, and an inverse relationship between risk-return and acquisition price.
a.       True
b.      False
2)      There are several risks involved with real estate including the following: opportunity cost, business risk, management risk, inflation, financial risk, liquidity risk, and many others.
a.       True
b.      False
3)      Real estate is homogeneous, meaning that every real estate investment has the same characteristics with a limited variation of benefits and risks.
a.       True
b.      False
4)      Improvements to land are depreciated but land itself is not because land is permanent and does not waste away with time.
a.       True
b.      False
5)      It is possible for an individual or a small amount of investors to dominate a particular real estate product locally.
a.       True
b.      False
6)      The increase in asset value over a certain period of time is ______.
a.       Reserve account
b.      Appreciation
c.       Tax shelter
d.      Cash flow
7)      The use of borrowed funds by an investor with the anticipation of increasing investment returns is called ______.
a.       Leverage
b.      Spread
c.       Inflation
d.      Mortgage reduction
8)      ______ is investing in a variety of assets to spread risk in order to avoid large losses.
a.       Monopoly
b.      Oligopoly
c.       Diversification
d.      Adjusted bias

Answers: 1)T   2)T   3)F   4)T   5)T   6)B   7)A   8)C

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