Ch.9 Questions By Jazmin Padilla

Ch.9 Questions 

By Jazmin Padilla

1. Which of the following is considered a risk in real estate:

a. Cash flow

b. Inflation Hedge

c. Diversification

d. Opportunity Cost 

2. ____is the risk that the investor cannot sell and convert a real estate investment into cash.

a. financial risk

b. liquidity risk 

c. inflation risk

d. management risk

3. The first step on an investment problem is to solve for:

a. taxable income

b. before-tax cash flow

c. before-tax equity reversion

d. capital gains tax

4. In order to calculate the NOI, one must add in operating expenses. 

5. Potential gross income can be calculated as number of units multiplied by rent price multiplied by the number of months for rent. 

6. Raw land is often considered a very risky investment, with a possible negative yield.  

7. Diversification increases portfolio risk. 

8. Unique to real estate and a benefit is the ability to obtain a spatial monopoly in investment property. 

Answers: 

1. D  2.B  3.B  4.F  5.T  6.T  7.F  8.T