Chapter 9 Questions By Arianna Sandoval

1.       For a return to increase in response to increasing risk the investors must pay less to acquire the asset. T/F

2.       According to the book which is not considered a major category of real estate risk?

a.       Opportunity Cost

b.      Management

c.       Appreciation

d.      Liquidity

3.       The risk that business or market conditions may change unexpectedly and unfavorably, thus reducing the investors return is referred to as

a.       Financial Risk

b.      Market Risk

c.       Liquidity Risk

d.      Risk

4.       Industrial Buildings are considered a management-intensive investment. T/F

5.       A reserve account will only make the NOI and cash flows negative, so it’s better to not add a reserve account in the pro forma. T/F

6.       ATCF takes into consideration taxes paid on cash flow, and the taxes charged are investor specific. T/F

7.       Mortgage interest deduction and taxation depreciation deduction are two major tax benefits but only one is a true tax benefit. T/F

8.       Which is not a reason why investors gladly take an annual depreciation deduction?

a.       Investors can control when capital gains are paid or even if they are paid.

b.      An investor would prefer a tax deduction today rather than the same tax reduction in the future.

c.       As long as capital gains tax rates are lower than income tax rates investors would rather pay the capital gains tax.

d.      Investors are allowed to depreciate land as well as the building.

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