UNIT 5

REITs normally own...

-commercial property (equity REITs) (property used exclusively for business purposes or to provide a workspace rather than a living space) -mortgages on commercial property (mortgage REITs), or

Which are the two basic types of Section 529 plans, which are products used for funding higher education?

1. savings plans 2. prepaid tuition plans

Under the guidelines of Subchapter M of the IRC, a REIT can avoid being taxed as a corporation by receiving ?% or more of its income from real estate and distributing ?% or more of its net investment income to its shareholders.

75%, 90%

Which of the following is the best description of a limited partnership?

An investment that permits both gains and losses to pass through to the investors

ETN investors receive what form of payment that is linked to the performance of the underlying index minus management fees when the note matures?

Cash payment ETNs are bond-like instruments with a stated maturity date, but they do not pay interest and offer no principal protection.

Definition: Senior, unsecured debt securities issued by a bank or financial institution. Therefore, they are backed only by the good faith and credit of the issuer.

ETN (The notes track the performance of a particular market index, but do not represent ownership in a pool of securities the way share ownership of a fund does.)

Being in a fiduciary position with responsibilities to others is specifically an advantage of which partner?

GENERAL partner

Costs for those items that would have no salvage value at the end of the program.

Intangible drilling costs (IDCs)

Are Education Savings Accounts (ESAs) a type of 529 plan?

NO

Are REITs classified as an investment company?

NO

Is a hedge fund considered an investment company?

NO

Do hedge funds require registration with the SEC?

NO (unregulated)

The value of an ETP is derived from other investment instruments, and it trades on a...

National securities exchange

Which plan allows the purchaser to pay the tuition for a particular K-12 or higher education institution at current rates, either in a lump sum or by periodic payment?

Prepaid tuition plan (529)

Mortgage, equity, and hyrbid are types of...

REITS (oil and gas would be a DDP)

Which plan allows the investor to accumulate money for use later in funding someone's education?

Savings plan (529)

What are advantages of the Limited partner?

The flow through of income and expenses, limited liability, and having an investment managed by the GPs

True or False: An owner of REITs holds an undivided interest in a pool of real estate investments.

True

True or False: REITs are not investment companies (open end or closed end).

True

True or False: REITs offer dividends and gains to investors but do not pass through losses like LPs and, therefore, are not considered DPPs. KNOW!!

True

True or false: ETNs track the performance of a particular market index

True

True or false: REITs may or may not be listed (trade) on exchanges.

True

Are ETFs marginable securities?

Yes

Hedge funds are considered...

a private investment company and, therefore, unregulated.

In a leasing partnership program, loans are taken to purchase equipment that is then leased to companies in return for the lease payments. This process...

allows for the loan interest and equipment depreciation to be taken as deductions that will shelter the income from the lease payments received.

Intangible drilling costs (IDCs) associated with oil and gas DPPs can generally...

be deducted completely in the first year of the program.

A REIT is taxed as a...

conduit

What is the primary risk for ETN's?

default and liquidity risk

Many REITs are registered with the SEC (public REIT) and, therefore, are subject to all...

disclosure documents

However, there are REITs that are not registered with the SEC, known as private REITs. Nonregistered REITs are not subject to...

disclosure documents (greater risk)

Many REITs are traded on a stock exchange. These are known as...

exchange-traded or listed REITs

A limited partnership (LP)

has two types of partners: general and limited.

The practice of attempting to limit or mitigate risk is...

hedging

what is the primary investment objective of hedge funds?

high returns

Hedge funds attempt to achieve ? returns and are associated with ? risk investments?

high, high

Hedge fund managers often employ

highly speculative strategies and products associated with substantial risk.

Funds having a lock-up provision are associated with being...

illiquid (can't trade bc locked up for certain amount of time)

An accredited investor is one who meets

income or net worth criteria with substantial investment experience.

All of the following would be associated with hedge funds except

investing in government debt securities.

FACs, UITs, and management companies are considered...

investment companies

A hedge fund having a lock-up provision means that...

investors are required to maintain the investment for a minimum length of time.

Hedge fund managers often employ (types of strategies)

leverage (borrowing to purchase securities), selling securities short, (selling securities the portfolio does not own), investing in commodities or currencies, and utilizing derivative products such as options or futures.

ETPs are priced so that the value of the product is derived from...

other investment instruments (commodities, a share price or interest rate)

the general partner is responsible for

running the partnership entity.

Investing in federal government debt securities, considered among the

safest and risk-free investments would be uncharacteristic of hedge funds.

ETPs are marginable and may be...

sold short

ETPs are benchmarked to...

stocks, commodities, or indices

What does "listed" mean?

trades on an exchange

True or false: REITs may or may not be registered (public or private) with the SEC.

true

REITs are organized as

trusts (investors buy shares or certificates of beneficial interest, either on stock exchanges or in the OTC market.)

Examples of Intangible Drilling Costs (IDCs)

wages, supplies (not equipment that can be depreciated), fuel, and insurance.

Are REITs registered under subchapter M?

yes

Are listed REITs liquid investments?

yes

Can REITs pass through gain but not losses?

yes