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AWMA EXAM 2 QUESTIONS AND ANSWERS 2024
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AWMA EXAM 2 QUESTIONS AND ANSWERS 2024
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AWMA EXAM 2 EXAM 2024ANSWER ALL QUESTIONS IN THIS SECTION
QUESTION 1
Which of the following cap rates would result in the highest valuation for a
property that has NOI of $1,250,000?
A) 12%
B) 5%
C) 10%
D) 7% - ANSWERS-B) A capitalization rate (cap rate) is an investor's required
return. The lower the cap rate, the less return an investor would require. Stated
another way, the lower the cap rate being used, the more an investor would be
willing to pay. In this case, $1,250,000/.05 = $25,000,000 intrinsic value. As the
cap rate increases (such as to 7%) the intrinsic value of the property will decrease.
Mod 3
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, AWMA EXAM 2 EXAM 2024
QUESTION 2
Nontraded REITs
A)are suitable for most investors.
B)are primarily sold by insurance companies.
C)offer many of the same benefits as publicly traded REITs.
D)typically do not have front-end fees. - ANSWERS-C) Both publicly traded and
nontraded REITs offer income and are a potential inflation hedge. Tax treatment
for both is also similar. Mod 3
QUESTION 3
Which of the following real estate property expenses is NOT an operating
expense?
A)Mortgage payments
B)Management fees
C)Reserve for replacements
D)Utility payments - ANSWERS-A) Mortgage payments are not part of operating
expenses. Mod 3
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, AWMA EXAM 2 EXAM 2024
QUESTION 4
For an investor who has purchased only publicly traded REITs in the past, which
of the following risks should he or she be aware of regarding the market value of
nontraded REITs on any given day?
A)Transparency risk
B)Systematic risk
C)Distribution risk
D)Pricing risk - ANSWERS-D) Nontraded REITs are typically sold over a period
of years at a fixed price per share. There is no trading market, and the offering
prices do not always reflect the net asset value. Share valuations are only required
every 18 months, so there is substantial pricing risk with nontraded REITs. Mod 3
QUESTION 5
Which of the following types of private real estate funds would most likely invest
in a strip mall that needs a renovation?
A) Value-added
B)Opportunistic
C)Speculative
D) Core - ANSWERS-A) A strip mall needing a renovation to bring back
customers would be an example of a value-added property investment. Mod 3
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, AWMA EXAM 2 EXAM 2024
QUESTION 6
Your client purchased a stock two years ago at $45 per share, and it is currently
trading at $25 per share. Even though the prospects for the company do not look
good, your client does not want to sell the stock until he can at least break even.
The behavioral bias closest to what your client may be exhibiting is
A)representativeness.
B)loss aversion.
C)status quo.
D)anchoring. - ANSWERS-B) Not wanting to take a loss is loss aversion. Mod 3
QUESTION 7
With a SIMPLE plan
A)the employee may not make elective contributions.
B)an IRA must be established.
C)the plan is subject to the nondiscrimination rules applicable to other qualified
plans.
D)all contributions to an employee's account are fully vested. - ANSWERS-D) The
contributions to an employee's account under a SIMPLE plan are fully vested. A
SIMPLE plan is not subject to the nondiscrimination rules applicable to other
qualified plans. A SIMPLE plan can be either a 401(k) plan or an IRA. An
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