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Alternative Investments - Alternative Investments Section 1 Online Exam Quiz

Important questions about Alternative Investments - Alternative Investments Section 1. Alternative Investments - Alternative Investments Section 1 MCQ questions with answers. Alternative Investments - Alternative Investments Section 1 exam questions and answers for students and interviews.

1. Alternative investment funds are most likely managed:

Options

A : passively.

B : to generate a positive beta returns.

C : to generate a positive alpha return.

D :

2. Compared with traditional investments, alternative investments are more likely to be characterized by higher:

Options

A : transparency.

B : liquidity.

C : expected returns.

D :

3. Relative to traditional investments, alternative investments are less likely to be characterized by:

Options

A : low correlation with traditional investments.

B : high level of regulation.

C : unique legal and tax considerations.

D :

4. Which of the following factors is most likely to be a characteristic of alternative investments?

Options

A : Narrow manager specialization.

B : High regulation.

C : High transparency.

D :

5. Alternative investments are least likely to be characterized by higher:

Options

A : fees.

B : illiquidity.

C : transparency.

D :

46. Zee Capital, a hedge fund with an initial investment capital of $200 million had a 40% return in its first year. At year end, a 4% management fee is charged based on the assets under management and a 10% incentive fee is charged. The management fee is calculated using end-of-period valuation. The fund value declines to $250 million in the second year. Assuming the fee structure is the same as given in the information above but is inclusive of a high water mark, which of the following is most likely to be the fees earned by Zee Capital in the second year?

Options

A : $10 million.

B : $25 million.

C : $35 million.

D :

47. Cole Hedge Funds had an invested capital of $100 million. It earned a return of 25% in the first year. Given that it follows a 4 and 20 fee structure, and calculates the incentive and management fees independently, the net return for the investors is closest to:

Options

A : 8%.

B : 15%.

C : 20%.

D :

48. The management fee for hedge funds is based on:

Options

A : initial investment.

B : committed capital.

C : assets under management.

D :

49. IFT Capital is a hedge fund with PKR 100 million of initial investment capital. IFT charges a 2% management fee based on assets under management at year-end and a 20% incentive fee. The hurdle rate is 10% and the incentive fee is based on returns in excess of the hurdle rate. The incentive and management fees are calculated independently. The fund has a return of 30% for the first year. What is an investor’s net return given this fee structure?

Options

A : 28.50%.

B : 23.40%.

C : 21.4%.

D :

50. A hedge fund had invested capital of 200 million on which it earned a return of 35% in its first year. It follows a 2 and 20 fee structure and calculates the incentive net of management fees. The total fee for the hedge fund in the first year is closest to:

Options

A : 44.00 million.

B : 19.40 million.

C : 18.32 million.

D :

6. Which of the following is least likely to be considered an alternative investment?

Options

A : Hedge funds.

B : Real estate.

C : Long-only stock funds.

D :

7. Which of the following is most likely to be correct about return?

Options

A : Beta, a measure of sensitivity, relative to a particular market index, is a the measure of unsystematic risk.

B : Owing to existing inefficiencies, a positive return can be earned through exploitation and after adjustment of beta risk. This is defined as an alpha return.

C : Alpha returns are correlated with beta returns and are presumably the result of managers’ special skills in capturing non-systematic opportunities.

D :

8. An investor is most likely to consider adding alternative investments to a traditional investment portfolio because of their:

Options

A : low sharp ratio.

B : high correlation with traditional investments.

C : diversifying potential.

D :

9. Which of the following is least likely to be based on realized profits for a funds’ structure?

Options

A : Incentive fee.

B : Management fee.

C : Performance fee.

D :

10. Which of the following is least likely to be a characteristic of a hedge fund?

Options

A : It is an aggressively managed portfolio of investments across asset classes.

B : Investors may be required to keep their money in the hedge fund for a minimum period known as a lock-up period.

C : It is an investment opportunity available to the public and requires hefty investment.

D :

11. Which of the following statements is most likely to be correct about funds of funds? Statement I: Funds of funds are funds that hold a portfolio of hedge funds. Statement II : Funds of funds presumably have some expertise in conducting due diligence on hedge funds. Statement III: Funds of funds may be able to negotiate better redemption.

Options

A : Statements I and II.

B : Statements I and III.

C : Statements I, II, and III.

D :

12. Which of the following is least likely to be a hedge fund strategy?

Options

A : Event driven.

B : Micro.

C : Relative value.

D :

13. A type of private equity fund that invests in established profitable and cash-generative companies with solid customer bases, proven products, and high-quality management is most likely described as a (an):

Options

A : venture capital.

B : angel investing.

C : leveraged buyout.

D :

14. An investor may prefer a fund of funds to a single hedge fund if she:

Options

A : seeks better redemption terms.

B : is concerned about the extra layer fee structure.

C : is willing and able to make a large initial investment.

D :

15. Analyst 1 : The management fee for a private equity fund is based on assets under management. Analyst 2: The management fee for a private equity fund is based on committed capital. Which analyst’s statement is most likely correct?

Options

A : Analyst 1.

B : Analyst 2.

C : Neither of them.

D :

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