Test your knowledge

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One risk of holding a lot of mortgage loans in a REIT is that _______ can affect their performance.

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Fluctuating interest rates

Equities

Volatility

Fluctuating interest rates. Changing interest rates on mortgage loans can affect performance negatively.

A real estate investment trust is most likely to focus on the area of _______.

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Mortgage loans

Distressed properties

Equity

A combination of the above

Equity. More than 90 percent of REITs invest in equity; smaller numbers invest in mortgage loans or a combination of equity and mortgage loans.

A real estate investment trust is a company that owns, manages, and/or operates real estate to earn profits for shareholders.

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True

False

True. This is why REITs, as they are called, were created.

The number of mutual funds investing in REITs totals _______.

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Fewer than 10

Fewer than 40

Close to 80

More than 100

Close to 80. NAREIT's Website lists close to 80 mutual funds that invest in REITs.

One disadvantage of investing in a real estate investment trust is ______.

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Its vulnerability to inflation

Historic low returns

Low returns due to decreased mortgage interest rates

High tax liability

Low returns due to decreased mortgage interest rates. REITs that invest in mortgage loans can post poor performances following drops in interest rates.

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