CHAPTER SEVENTEEN QUIZ

All investors desire their investments to increase in value. However,

the degree of return is inversely related to the degree of risk.
the more the investor stands to gain, the greater the risk that the investor may lose.
investments requiring intense management have lesser returns.
the more liquid an investment is, the greater the chances are that the investment will not appreciate.

A real estate investment can take a long period of time to sell. For the investor, this means that real estate is

management intensive.
insensitive to marketing.
vulnerable to seller's markets.
relatively illiquid.

A broker is reviewing the balance sheet of her new listing to sell a business. Three of the entries on the books are licenses, trademarks, and goodwill. These would be examples of

tangible assets.
intangible assets.
short-term liabilities.
long-term liabilities.

Taxable income produced by an income property is

gross income minus expenses plus land and building depreciation.
gross income minus expenses minus land and building depreciation.
gross income minus building depreciation plus land depreciation.
gross income minus expenses minus building depreciation.

Two of the rewards that investments offer are

income and tax benefits.
negative leverage and appreciation.
appreciation and taxation.
positive leverage and prestige.

Which of the following is true of the tax treatment of a principal residence?

The owner may deduct the property's interest and principal from ordinary income.
The owner may depreciate the property and deduct depreciation expenses.
The owner can deduct any capital gain when the property is sold.
The owner may be able to exclude capital gain from taxable income when the property is sold.

One way investors measure the yield of an investment is by

dividing net operating income by cash flow.
multiplying the investor's required yield times after-tax cash flow.
dividing cash flow by the investor's equity.
multiplying cash flow times the price paid for the property.

A CLUE Home Seller’s Disclosure Report shows a ____ insurance-loss history for a specific property.

180-day
one-year
three-year
five-year

In business brokerage, the notion of goodwill is best defined as

the commitment by the agent to expend maximum effort on the listing.
establishing pricing levels that will generate the good will of prospective customers.
the value or price of the business over and above the value of its other assets.
the portion of the sale price that is depreciable.

Capital gain tax is figured by multiplying one’s tax bracket times

the sum of the beginning basis plus gain.
the difference between net sale proceeds and adjusted basis.
the sum of net sale proceeds and capital gain.
the difference between net sale proceeds and capital gain.

Cash flow is a measure of how much pre-tax or after-tax cash an investment property generates. To derive cash flow it is therefore necessary to exclude

cost recovery expense.
interest expense.
loan principal payments.
net operating income.

Compared to a stock portfolio, a real estate investment would be considered

a riskier investment.
a more management-intensive investment.
a shorter-term investment.
a more leveraged investment.

As a general rule, in deriving taxable income on an investment property, it is legal to

deduct principal and interest payments from income.
deduct principal payments from income.
deduct interest payments from income.
deduct principal and interest payments from income and capital gain.

An investment property seller pays $14,000 in closing costs. These costs

may be deducted from personal income.
may be deducted from the property's income.
may be deducted from the sale price for gains tax purposes.
may be deducted from the adjusted basis for gains tax purposes.

An investor invests in fifteen diversified bond funds. This is an example of an investment in

money.
Second option
debt.
New Option

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