EQUITY INVESTMENTS BOARD EVALUATION GUARANTEED PASS UPDATED ACTUAL EXAM
QUESTIONS CORRECT ANSWERS GRADED A PLUS
Question:
How does private equity differ from public markets?
Answer:
Private equity investments are not freely tradable and require long-term capital commitment, unlike
public markets.
Question:
Who are the main parties in a private equity fund?
Answer:
Limited Partners (LPs) and General Partners (GPs). LPs provide capital, while GPs manage the fund
and make investment decisions.
Question:
What is the lifecycle of a private equity fund?
Answer:
It includes fundraising, investment period, holding period, and divestment period.
Question:
What is the J-curve in private equity cash flows?
Answer:
A pattern where early cash flows are negative due to investments and fees, but become positive later
as portfolio companies are sold.
, Question:
How do management fees and carried interest work in private equity?
Answer:
Management fees are charged as a percentage of committed capital, while carried interest is a share
of profits earned by the GP after thresholds are met.
Question:
Why are incentives important between GPs and LPs?
Answer:
Incentives align GP behavior with LP objectives, encouraging long-term value maximization.
Question:
What do venture capital funds primarily invest in?
Answer:
Early- stage companies that may not yet be profitable, facing high uncertainty and risk.
Question:
Why are VC returns described as tail-heavy?
Answer:
Most investments generate little or no return, while a few successful companies generate the
majority of profits.
Question:
Why do VCs invest in stages?
Answer:
To manage risk by evaluating progress before committing further capital.
QUESTIONS CORRECT ANSWERS GRADED A PLUS
Question:
How does private equity differ from public markets?
Answer:
Private equity investments are not freely tradable and require long-term capital commitment, unlike
public markets.
Question:
Who are the main parties in a private equity fund?
Answer:
Limited Partners (LPs) and General Partners (GPs). LPs provide capital, while GPs manage the fund
and make investment decisions.
Question:
What is the lifecycle of a private equity fund?
Answer:
It includes fundraising, investment period, holding period, and divestment period.
Question:
What is the J-curve in private equity cash flows?
Answer:
A pattern where early cash flows are negative due to investments and fees, but become positive later
as portfolio companies are sold.
, Question:
How do management fees and carried interest work in private equity?
Answer:
Management fees are charged as a percentage of committed capital, while carried interest is a share
of profits earned by the GP after thresholds are met.
Question:
Why are incentives important between GPs and LPs?
Answer:
Incentives align GP behavior with LP objectives, encouraging long-term value maximization.
Question:
What do venture capital funds primarily invest in?
Answer:
Early- stage companies that may not yet be profitable, facing high uncertainty and risk.
Question:
Why are VC returns described as tail-heavy?
Answer:
Most investments generate little or no return, while a few successful companies generate the
majority of profits.
Question:
Why do VCs invest in stages?
Answer:
To manage risk by evaluating progress before committing further capital.
