Question 1

When an option writer does not own the asset,it is called a​

Accepted Answer

A)   ​straddle.
B)   ​naked option.
C)   ​covered option.
D)   ​warrant. B

Question 2

High-risk investments include​

Accepted Answer

A)   ​collectibles.
B)   ​options.
C)   ​futures contracts.
D)   ​All of these

Question 3

Raw land and residential lots are the safest forms of real estate investment.

Accepted Answer

A) True 
 B)False  False

Question 4

It is sometimes possible to buy a real estate investment at a bargain price if the current lender on the property in foreclosure is willing to accept less than the full amount owed on the mortgage by using a​

Accepted Answer

A)   ​deficiency amount.
B)   ​short sale.
C)   ​bridge loan.
D)   ​reverse mortgage.

Question 5

Most options expire without being exercised.

Accepted Answer

A) True 
 B)False

Question 6

Real estate does not include

Accepted Answer

A)   ​land.
B)   ​permanent structures.
C)   ​furniture.
D)   ​mineral rights.

Question 7

During times of high mortgage interest rates,real estate investors can expect a positive cash flow.

Accepted Answer

A) True 
 B)False

Question 8

The most positive characteristic of a real estate investment is its low degree of risk.

Accepted Answer

A) True 
 B)False

Question 9

When an asset does not generate a readily quantifiable return (such as rent,interest,or dividends),its value is mainly determined by supply and demand.

Accepted Answer

A) True 
 B)False

Question 10

____ is not an example of a capital improvement.

Accepted Answer

A)   ​Adding a new roof
B)   ​Fixing a plumbing leak
C)   ​Remodeling a kitchen.
D)   ​Putting in a sprinkler system

Question 11

Buying ____ is a way to immunize a conservative investor's portfolio against severe price declines because safeguard profits.

Accepted Answer

A)   ​calls
B)   ​puts
C)   ​futures
D)   ​commodities

Question 12

A buyer of a futures contract benefits if the price of the commodity increases.

Accepted Answer

A) True 
 B)False

Question 13

Advantages of real estate investing include​

Accepted Answer

A)   ​low financial risk.
B)   ​simplicity compared to alternative investments.
C)   ​minimal time requirement to manage.
D)   ​None of these.

Question 14

Depreciation is the decline in value of an asset over time due to normal wear and tear and to obsolescence.

Accepted Answer

A) True 
 B)False

Question 15

The ____ is a computation of how much income the investor might pocket from rent each year before mortgage payments as a percentage of the purchase price.

Accepted Answer

A)   ​current income
B)   ​cash flow
C)   ​rental yield
D)   ​price-to-rent ratio

Question 16

The amount of money left over after paying operating expenses in an income producing investment is called profit.

Accepted Answer

A) True 
 B)False

Question 17

Which is not a characteristic of a true timeshare arrangement?​

Accepted Answer

A)   ​Provides a long-term lease
B)   ​Right-to-use purchase
C)   ​Can be locked out of the premises by the creditors
D)   ​Grants legal real estate ownership to the purchaser D

Question 18

Capital gains on real estate are realized through price depreciation.

Accepted Answer

A) True 
 B)False

Question 19

Misty and Jason rented out their lake house for five days and were paid $800.Assuming this is their only rental income and they are in the 28 percent marginal tax bracket,their tax liability on this $800 would be​

Accepted Answer

A)   ​$576.
B)   ​$448.
C)   ​$224.
D)   ​$0.

Question 20

The advantages of real estate investing do not include

Accepted Answer

A)   ​a potential positive cash flow.
B)   ​a potential for price appreciation.
C)   ​the availability of leverage.
D)   ​a high level of liquidity.

Exam 16: Real Estate and High-Risk Investments

When an option writer does not own the asset,it is called a​

Correct AnswerverifiedB

High-risk investments include​

Correct AnswerverifiedShow Answer

Raw land and residential lots are the safest forms of real estate investment.

Correct AnswerverifiedFalse

It is sometimes possible to buy a real estate investment at a bargain price if the current lender on the property in foreclosure is willing to accept less than the full amount owed on the mortgage by using a​

Correct AnswerverifiedShow Answer

Most options expire without being exercised.

Correct AnswerverifiedShow Answer

Real estate does not include

Correct AnswerverifiedShow Answer

During times of high mortgage interest rates,real estate investors can expect a positive cash flow.

Correct AnswerverifiedShow Answer

The most positive characteristic of a real estate investment is its low degree of risk.

Correct AnswerverifiedShow Answer

When an asset does not generate a readily quantifiable return (such as rent,interest,or dividends),its value is mainly determined by supply and demand.

Correct AnswerverifiedShow Answer

____ is not an example of a capital improvement.

Correct AnswerverifiedShow Answer

Buying ____ is a way to immunize a conservative investor's portfolio against severe price declines because safeguard profits.

Correct AnswerverifiedShow Answer

A buyer of a futures contract benefits if the price of the commodity increases.

Correct AnswerverifiedShow Answer

Advantages of real estate investing include​

Correct AnswerverifiedShow Answer

Depreciation is the decline in value of an asset over time due to normal wear and tear and to obsolescence.

Correct AnswerverifiedShow Answer

The ____ is a computation of how much income the investor might pocket from rent each year before mortgage payments as a percentage of the purchase price.

Correct AnswerverifiedShow Answer

The amount of money left over after paying operating expenses in an income producing investment is called profit.

Correct AnswerverifiedShow Answer

Which is not a characteristic of a true timeshare arrangement?​

Correct AnswerverifiedD

Capital gains on real estate are realized through price depreciation.

Correct AnswerverifiedShow Answer

Misty and Jason rented out their lake house for five days and were paid $800.Assuming this is their only rental income and they are in the 28 percent marginal tax bracket,their tax liability on this $800 would be​

Correct AnswerverifiedShow Answer

The advantages of real estate investing do not include

Correct AnswerverifiedShow Answer

When an option writer does not own the asset,it is called a

Correct Answer
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B

High-risk investments include

Correct Answer
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False

It is sometimes possible to buy a real estate investment at a bargain price if the current lender on the property in foreclosure is willing to accept less than the full amount owed on the mortgage by using a

Correct Answer
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Correct Answer
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Advantages of real estate investing include

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Which is not a characteristic of a true timeshare arrangement?

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D

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Misty and Jason rented out their lake house for five days and were paid $800.Assuming this is their only rental income and they are in the 28 percent marginal tax bracket,their tax liability on this $800 would be

Correct Answer
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Correct Answer
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