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(a) Real estate investment trusts (REITs) typically use a higher level of debt in their capital structure (i.e., they are comparatively more leveraged). Briefly explain

(a) Real estate investment trusts (REITs) typically use a higher level of debt in their capital structure (i.e., they are comparatively more leveraged). Briefly explain why.

(b) Suppose a support tranche is being analyzed using the Monte Carlo simulation methodology. The theoretical value using 10,000 interest-rate paths is 92. The range for the path present values is a low of 82 and a high of 102. The standard deviation of the path present values is 6. Are you confident about the theoretical value of 92? Please briefly explain.

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