- CFA Exams
- CFA Level I Exam
- Study Session 15. Alternative Investments
- Reading 40. Publicly Traded Real Estate Securities
- Subject 4. Discount cash flow approach
CFA Practice Question
Most analysts think that the required rate of return used in a DCF model for REITs and REOCs should be ______ the average stock in the broader market.
B. the same as.
C. lower than.
A. higher than.
B. the same as.
C. lower than.
Correct Answer: C
Due to the characteristics of commercial real estate and the REIT structure, most of a REIT's cash flow is reliable and may be predicted with a relatively higher level of confidence than many other industries.
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