2013 CFA Level I Alternative Investments Quiz 1

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Alternative Investments Quiz 1 (20 Questions, 30 min)

1. Which of the following best describes the stage where financing is provided to help a company go public? A. Formative Stage B. Mezzanine Stage C. Later Stage Financing 2. Parker Hedge Fund uses fundamental analysis to pursue a strategy of taking long positions in undervalued firms. Parker Hedge Fund strategy can be best described as: A. Fundamental growth strategy B. Relative value strategy C. Fundamental value strategy 3. Which of the following is least likely to be an advantage of Funds of Funds investing? A. It grants new investors access to hedge funds. B. It allows for diversification. C. It enables investors with limited capital to invest in hedge funds. 4. Amber stated, Its the gain or loss resulting from re-establishing positions as contracts expire. Which of the following is Amber most likely to be defining? A. Collateral Yield B. Price Yield C. Roll Yield 5. Which of the following is least likely to be categorized under hedge funds? A. Managed Future Funds B. Distressed Security Funds C. Exchange Traded Funds 6. An investor wants to enter into alternative investments with the objective of hedging himself against inflation. He is least likely to invest in : A. Commodity derivatives B. Farmland C. Multi-strategy hedge fund 7. During a lecture, Kate reads off the CFA Program curriculum, Sharpe ratio may not be the appropriate risk-return measure for alternative investments. Which of the following is least likely to be the reason behind the statement? A. Most alternative investments are illiquid and hence the returns calculated are not accurate since they are only based on price estimates. B. Most alternative investment returns are positively skewed with extreme potential gains which renders standard deviation an unsuitable measure of risk. C. The Shape ratio uses standard deviation which does not measure systematic risk. .
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2013 CFA Level I Alternative Investments Quiz 1

Irfanullah.co

8. What do distress securities and venture capital have in common? A. Illiquidity B. Long time horizon C. Both illiquidity and long time horizon 9. Which of the following is least likely to be a part of private equity? A. Leveraged Buyouts B. Distressed Investing C. Exchange Traded Funds 10. Which of the following strategies is most likely to be defined as a strategy focused on the purchase of sufficient equity in order to influence a companys policy or direction? A. Activist Strategy B. Restructuring Strategy C. Multi-Strategy 11. Pulpo Capital is a hypothetical hedge fund with an initial investment worth $200 million and a 25% return at the end of first year. The fund charges a management fee based on the assets under management at the end of the year equivalent to 4% and a 15% incentive fee. Which of the following is most likely to be the total fees earned? A. $9.5 million B. $17.5 million C. $47.5 million 12. Which of the following is the most accurate description of backwardation? A. A situation where the spot price exceeds the forward or futures price. B. A situation where the forward or futures price exceeds the spot price. C. A situation where the forward or futures price is equivalent to the spot price. 13. Which of the following factors is least likely to be a challenge for alternative investments? A. Illiquidity B. Limited Portfolio Transparency C. Symmetric Risk and Return Profiles 14. MLC 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 and management fees independently. The net return for its investors in the first year is closest to: A. 5.84% B. 18.74% C. 25.30% 15. Which of the following statements is most likely true for a fund of funds? A fund of funds: A. is usually the last one to redeem money when hedge funds start performing poorly B. provides access to hedge funds that are otherwise closed to investor C. offers investors a lower fee alternative than hedge funds 16. Which of the following is least likely a form of real estate investment:
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2013 CFA Level I Alternative Investments Quiz 1

Irfanullah.co

A. Mortgage-backed securities B. Real estate limited partnerships C. Leveraged buyouts 17. Investors gain exposure to commodities least likely because: A. they want to trade in a physical product B. commodity prices have historically been correlated with inflation C. commodity prices are linked to economic growth 18. Which of the following is most likely true for risk-return measures evaluating alternative investments: A. due to illiquid nature of assets, volatility estimates are overstated B. most alternative investments show positively skewed return distributions C. calculation of value-at-risk using standard deviation tends to be understated 19. Which of the following is least likely a source of return for commodities related investments: A. Collateral yield B. Interest yield C. Spot price return 20. The futures price of cotton is higher than the expected future spot price. This scenario referred to as: A. Contango B. Natural Contango C. Full Carry

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