Series 7 Exam Question 203: Answer and Explanation

Question: 203

Which of the following oil and gas DPPs has the highest capital appreciation potential?

• A. Exploratory
• B. Developmental
• C. Income
• D. Combination

Correct Answer: A

Explanation:

A. Exploratory or wildcatting programs have the highest capital appreciation potential because the drilling takes place in unproven areas. If the partnership finds oil, it paid relatively little for the land as compared to drilling in proven areas, so the capital appreciation potential is high.