Series 7 practice questioneasyEquity Securities 4
A REIT is generally required to distribute most of its taxable income to shareholders to maintain favorable tax treatment. This means REITs are often associated with:
- Aguaranteed principal stability
- Brelatively high income distributions✓ Correct answer
- Czero sensitivity to interest rates
- Dfull FDIC insurance
Explanation
Why B — relatively high income distributions
Because REITs distribute most taxable income, they are often used by investors seeking income. Their market prices can still fluctuate significantly with real estate values, credit conditions, and interest rates.
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