SIE Understanding Products and Their Risks Question 66: Answer and Explanation

Question: 66

How is a direct participation program that is a real estate limited partnerships traded?

• A. If listed, it would trade on any national exchange.
• B. They may only be traded with other limited partners in the same partnership.
• C. They are only traded after market value is determined at the close of trading each day.
• D. Investors may find broker-dealers who stay aware of such investments and receive compensation for doing so.

Correct Answer: D

Explanation:

D: Choice D is correct because some broker-dealers stay aware of the market for real estate limited partnerships. Choice A is incorrect because a limited partnership's operations are not designed to allow for daily trading. Choice B is incorrect because a limited partner may trade the partner's ownership interest with the general partner. While some partnership agreements may provide other partners the right of first refusal, this is not universal requirement. Choice C is incorrect because its market value is difficult to measure at any given time because of its illiquidity.