Exam 20: Investments in Real Assets

A negative aspect of diamond investments is the relatively high cost of buying and selling them.

In a(n) ____ arrangement, the borrower may end up making payments to cover not only the loan amortization, but also interest on deferred interest from an earlier period.

Depreciation

A shared appreciation mortgage usually has an interest rate below current market rates.

A limited partnership can be either private or public in nature.

Movements between various real and monetary assets are less positively correlated than those for monetary assets alone.

The value of real assets moves closely with the value of financial assets, and therefore they provide effective portfolio diversification.

Under an equity participation arrangement, the lender not only provides the borrowed capital, but part of the equity ownership funds as well.

The gold coin that trades at the smallest premium over its pure bullion value is:

A variable-rate mortgage allows the borrower to select a different rate of interest depending on economic conditions.

Limited liability is particularly important in real estate because mortgage debt obligations may exceed the net worth of participants.

In evaluating a general partner of a limited partnership, an investor should be sensitive to his or her:

Graduated payment mortgages may require payment of interest on accumulated, unpaid interest.

Real assets in comparison to financial assets are more likely to produce:

A shopping center has annual net operating income of $1,050,000 and a capitalization rate of 8%. What is its value?

Which of the following is NOT a characteristic of real estate investment trusts?

Twin factors that make real estate an attractive investment are tax write-offs and appreciation from inflation.

The value of the comparable sales approach to real estate valuation is that it is highly theoretical.

The price of diamonds around the world is controlled not by economic factors, but by one monopolistic company.

Diamonds have enjoyed an enviable record of no price declines over the past few years.