Juan Owned a Small Rental Property, Which Was Condemned by the County

question 47

Multiple Choice

Juan owned a small rental property, which was condemned by the county to expand a local park.His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county.A year later he purchased a similar piece of real estate for $70,000.What is Juan's basis in the replacement property?

• A)$40,000
• B)$45,000
• C)$50,000
• D)$70,000

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Definitions:

Market Risk Premium

The extra return over the risk-free rate that investors require to compensate them for the risk of investing in the stock market.

Risk-free Rate

The return on an investment with no risk of financial loss, often associated with government bonds.

Required Return

The minimum expected yield by investors for providing capital to a company or project.

Betas

A measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole, often used in the Capital Asset Pricing Model.