Which of the following statements is most accurate?

A. An equity REIT invests in properties such as apartments and hotels.
B. A REIT is similar to an open-end fund.
C. In a RELP, all parties have limited liability.
D. A mortgage REIT is a type of mortgage-backed security (MBS).

Correct Answer: A

A REIT (real estate investment trust) is like a closed-end fund. It raises its capital by an initial sale of shares to investors. It then invests the capital in various types of real estate. In a RELP (real estate limited partnership), the general partners assume unlimited liability while the investors have limited liability. A mortgage REIT is a fund that makes construction and mortgage loans; it is not a type of MBS.