- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 44. Economics and Investment Markets
- Subject 6. Commercial Real Estate
CFA Practice Question
The credit quality of a commercial property portfolio is determined by the credit quality of the ______.
B. underlying properties
C. management company
A. underlying tenants
B. underlying properties
C. management company
Correct Answer: A
The lower the credit quality of the tenants, the higher the credit risk of the portfolio.
User Contributed Comments 2
| User | Comment |
|---|---|
| thebkr777 | Can anyone explain? |
| FRAbyFRA | Think of credit quality in the context of a bond. If the bond issuer has low credit quality, it becomes more likely that coupon payments won't be made. The same applies to rent payments from commercial property tennants, which provide the "fixed income" portion of the property's return. |