Series 7 practice questionhardAlternative Investments — REITs
A client is considering a non-traded REIT. Which of the following risks is MOST specific to non-traded REITs compared to publicly traded REITs?
- AInterest rate risk
- BCredit risk from tenant defaults
- CInflation risk
- DIlliquidity and difficulty determining fair market value✓ Correct answer
Explanation
Why D — Illiquidity and difficulty determining fair market value
Non-traded REITs do not trade on public exchanges, making them highly illiquid — investors may be unable to sell their shares easily or at all before the REIT liquidates or lists. Additionally, because there is no public market price, it is difficult to determine the current fair market value. Non-traded REITs also typically have higher fees and commissions than publicly traded REITs.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Information & Recommendations questions
- A hybrid REIT combines which two investment strategies?
- Which type of REIT is most sensitive to interest rate changes?
- In a direct participation program (DPP), losses flow through to:
- An equity REIT primarily generates income from:
- Under the at-risk rules for DPPs, a limited partner's deductible losses are limited to:
- A Real Estate Investment Trust (REIT) must distribute what minimum percentage of its taxable income to shareholders to…
- Passive income from a limited partnership can be offset by:
- Variable annuity separate accounts are regulated as: