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7. Jane and her husband bought a home in an area where values were rapidly appreciating. Within 15 months, the value of their home increased by $75,000. They decided to sell and take their profit. Will they have to pay capital gains tax? . a. No, because residential real estate is always exempt from capital gains tax.
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b. No, because they won't make enough money on the sale. c. No, because they owned the property for more than a year. d. Yes, because they owned the property for less than two years.
8. Five years ago, XYZ Corporation issued $25 million in bonds that had a AAA rating and paid a 4% coupon rate. Since then, the company has experienced a lot of difficulties: two new products failed, a large number of employees were laid off, and the CEO resigned. This year, XYZ issued $20 million in bonds that have a C rating. Will the coupon rate on these bonds be lower or higher than 4%? Explain your answer. _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ 9. REIT stands for a. Return on Investment c. Real Estate Investment Trust b. Risk Excepted Investment Tax d. Real Estate Interest Tax 10. Lindsey has already invested in stocks and bonds. Now she wants to diversify her investments by adding commercial real estate to her portfolio. Unfortunately, she does not have enough money to purchase properties on her own. Explain how Lindsey could use the smaller amount of money that she currently has in order to invest in real estate. _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ 11. Ernesto and his partners want to buy a small apartment building for their investment portfolio. They want a positive cash flow. What is that? What is a negative cash flow? _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ PRODUCT PREVIEW
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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 215
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