Series 7: Exercise

Exercise

Answer the following questions.

1. Order the following from lowest risk to highest risk:

I. A DPP hoping to strike oil buys 125 acres in Tennessee from a cotton farmer.

II. A DPP buys a 10-year-old apartment building in downtown Seattle. It currently has a vacancy rate of 4.8%.

III. A DPP buys a partially completed condo complex in San Diego from a company that is in bankruptcy.

A. I, II, III

B. II, III, I

C. III, I, II

D. III, II, I

2. What is the difference between an operating lease and a full payout lease?

A. An operating lease pays only the operating cost of the equipment; a full payout lease pays depreciation and amortization costs

B. An operating lease is shorter term and pays less than the full cost of the equipment; a full payout lease may last for the life of the equipment and pays the purchase cost of the machinery and debt-service costs

C. An operating lease is month-to-month; a full payout lease has a specified end date

Answer true or false.

3. _____ A DPP that invests in Section 8 housing will benefit from tax credits on