Exam 16: Real Estate and High-Risk Investments

Karen purchased a rental property in 1995 for $45,000.In 2005 she traded this property and $10,000 in cash for a rental property valued at $105,000.In 2014,Karen sold that property for $135,000.What was her taxable income when she sold the property in 2014?

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

Investment in real estate generally requires many thousands of dollars,often with an initial outlay of $15,000 or more.

Using borrowed funds to increase the rate of return on an investment is called leverage.

One of the limitations to purchasing a hedge fund is that you must own investments over $1 million.

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

People who pursue options and futures investments should have a moderate-to-aggressive investment philosophy.

____ must actually buy or sell an optioned common stock if requested by the holder of the option contract.

While worldwide demand for precious metals and gems certainly exists,the ones who make the profits on these investments are

Some people are persuaded by telemarketers to buy precious metal and stones.

In a zero-sum game,the overall return actually becomes ____ if transaction costs are included.

You might want to sell an option to prevent further losses if its market price is dropping.

Failing to factor in income lost due to vacancies and collection costs for tenants who do not pay is a mistake that real estate investors may make.

One receives an actual title to property with the right-to-use purchase of a timeshare

Juan traded a rental house he had purchased for $100,000 six years ago to Randy for a rental house worth $125,000.Juan will have to pay taxes this year on $25,000 capital gain.

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

If you receive $24,000 in annual rent on property that costs you $250,000,what is your rental yield on this property?

When an investment is termed a zero-sum game,the collective wealth of all investors remains the same if transaction costs are ignored.

Aggressive investors take a particularly speculative position when they do not own the underlying asset,as when they buy naked options or sell naked puts.

Timesharing should be considered vacation plans rather than real estate investments.