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1. A financial asset has a corresponding liability; a real asset does not, although one
might be produced to finance the asset.
2. Developed land is better suited to generating income than undeveloped land. Most
investors buy undeveloped land with the intent of selling it later at a profit.
3. Real estate is the tangible asset; real property is a legal interest in real estate.
4. Residential, commercial, industrial, farm, special purpose.
5. All land areas are unique; even adjacent plots will differ concerning their microsite
factors. This means they are not all equally desirable, and therefore not equally
6. As collateral, as a strategic investment, as a pure investment.
7. Volume of wood, diameter of the trees, market price of the species.
8. Timber prices, land values, product class shifts, biological growth.
9. Biological risks deal with the possibility of loss from a natural event such as fire,
wind, disease, or insects. Economic risks deal with liquidity, regulatory, or
management issues.
10. Such an index probably should be based on both the market value of a species of
timber and a reflection of the usual timber growth rate. It is likely that more than one
index will always be necessary to provide complete information about timber prices.
11. No. Poor management can adversely affect the value of just about anything.
12. Larger trees are worth much more than smaller trees. As the diameter of a tree passes
through certain thresholds, the tree becomes suited for more expensive purposes.
Forests that are undergoing a product class shift are more valuable than younger
13. Such an index ignores the fact that trees act as their own factory. This means that
there will be an increase in the value of the wood even if the market price remains
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14. Relative value of world currencies, anticipated inflation and its impact on oil prices,
world uncertainty, extraordinary demand (such as the Japanese gold coin
phenomenon), and the London fix.
15. Bullion, gold shares, gold certificates, gold coins.
16. A twice-daily settlement price for gold determined by a group of British banks. The
London fix seeks to find an equilibrium price balancing supply and demand.
17. The “European cartel” refers to the London fix, and this is not really a cartel. Also,
the London fixing procedure probably would not be able to manipulate the market
price of gold beyond the equilibrium value for very long.
18. Many pension funds have begun to include managed futures in their portfolios for
precisely this reason.
Chapter Fourteen