CAIA Sample Exam Level 1 Questions and Answers 100% Verified

CAIA Sample Exam Level 1 Questions and Answers 100% Verified The Fisher effect states that nominal interest rates are equal to the sum of real interest rates plus which of the following? - answerA premium for anticipated inflation Which of the following outside service providers assist hedge funds through bookkeeping, third- party information gathering, and security valuation functions? - answerFund administrators A private equity fund is structured as deal-by-deal carried interest for determining profits and distributing incentive fees. What is a key advantage of such an incentive scheme? - answerIt is effective in attracting talented managers In estimating alpha, the expected return of an investment must be adjusted for which of the following? - answerThe risk-free rate and systematic risk A fund is organized to deliver beta as cheaply as possible through a passive product tied to a broad financial market benchmark. How would this fund's strategy be described? - answerAs an asset gatherer Two firms have daily first-order autocorrelation coefficients of returns equal to 0.90. What does this imply? - answerThe returns of either firm on consecutive days are highly correlated Under which of the following conditions will an investor with positions in futures contracts receive a margin call? - answerThe maintenance margin becomes greater than the collateral Which of the following best contrasts forward contracts with futures contracts? - answerForward contracts generally have more counterparty risk A timberland investment management organization (TIMO) manages a property on behalf of an investor. What is the term for the economic dispersion resulting from the organization making decisions contrary to the investor's interests? - answerAgency risk A pension fund seeking exposure to commodities is restricted from investing in leveraged products. What is the most likely reason why this fund would choose to invest in commodity- linked notes (CLNs) rather than commodity futures? - answerCLNs are considered debt instruments When a futures market is in backwardation, which of the following best describes the roll return of a long position in a futures contract that is held until delivery? - answerConvergence causes the roll return to be positive It has been observed that index returns reported by hedge fund databases tend to overstate what a new investor can obtain in the hedge fund marketplace. Which of the following biases is the most likely cause of this? - answerFee bias In the context of evaluating performance of a particular hedge fund for the purpose of determining incentive fees, which of the following best defines high-water mark? - answerThe highest NAV recorded on an incentive fee computation date Which of the following determines the hedge ratio in a typical stock-for-stock merger arbitrage trade? - answerThe ratio bet