Question

# 1.According to NAREIT, REIT stocks correlation with the S&P 500 during the period from 1980 through...

1.According to NAREIT, REIT stocks correlation with the S&P 500 during the period from 1980 through 2010 was 0.55. If the S&P 500 gained 10% during this period, what is the expected gain in REIT stocks?

 1 5.5% 2 5.0% 3 4.5% 4 10%

2.

By law, REITs are required to distribute 90% of their pretax income to shareholders. REITs are not taxable but shareholders are. If a REIT pays out a dividend of \$1,000 and the shareholder has a tax rate of 40%, what is the after tax return to the shareholder?

 1 \$400 2 \$600 3 \$1,000 4 \$950

3.

REITs are required to have at least what % of its assets invested in real estate, mortgage loans and shares in other REITs?

 1 70% 2 75% 3 80% 4 90%

4.REITs are required to derive at least what % of gross income from rents, mortgage interest, or gains from the sale of property?

 1 65% 2 75% 3 95% 4 100%

5.If the value of a property is \$10M, and the NOI is \$450K, what is the implied cap rate?

 1 3.5% 2 4.0% 3 4.5% 4 5.0%

6.If a property has an NOI of \$600K, and a comparable property traded at a 5% cap rate, what is a reasonable estimate of the property's value?

1.  1 \$12M 2 \$10M 3 \$8M 4 \$14M

7.The REIT Modernization Act enabled REITs to own a taxable subsidiary. This enabled the REIT's to engage in what for-profit activities?

 1 Merchant property development 2 Fee brokerage 3 Telecom and broadband 4 All of the above.

1.

Correlation = 0.55

S&P 500 gained by 10%

REIT gain = 0.55(10)

REIT Gain = 5.5%

2.

Dividend = \$1000

After tax dividend = (1 - 0.40)1000

After tax dividend = \$600

3.

Option B is correct

75%

Explanation:

REIT needs to invest atleast 75% of its assets invested in real estate, mortgage loans and shares in other REIT.

4.

Option B is correct

75%

Explanation:

REIT needs to have 75% of gross income from rents, mortgage interest, or gains from the sale of property

5.

Cap Rate = 450000/10000000

Cap Rate = 4.5%

Option C is correct

6.

Value of Property = 600,000/0.05

Value of Property = \$12M

7.

Option A is correct

Merchant property development

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