AWMA QUESTIONS AND
VERIFIED CORRECT
ANSWERS GRADED A+
LATEST 100% GUARANTEED
PASS
Capital Market Line - CORRECT ANSWER-A graphical representation of the relationship between
risk and return, where risk is measured by standard deviation; the CML includes the concept of
a risk-free rate of return
Jenson Performance index - CORRECT ANSWER-Used in comparing performance money
managers on a risk-adjusted basis and can be used by itself. A number above 0.00 indicates the
manager had better performance than would be expected given the risk he took... vice versa
How are Treynor and Sharpe indexes best used? - CORRECT ANSWER-Both are used to compare
the risk - adjusted returns on diff funds. The higher the risk-adjusted return, the better. The key
diff is that Treynor uses Beta as its risk measure, so Treynor can only be used with fully
diversified portfolios. Sharpe, uses Standard deviation (total risk) as its measure of risk so can
only be used with either fully diversified or nondiversified portfolios
Benefits of Buy and hold - CORRECT ANSWER-returns at least as good as strategies based on
technical analysis, low transactional costs, the deferral of capital gains taxes on profits, not
missing the best days of the market
Property' value - CORRECT ANSWER-NOI/Cap Rate
, Typical hedge fund fees - CORRECT ANSWER-annual management fee (typically around 2%),
most have incentive (performance) fee between 10 and 20% of the funds profits. The term "2
and 20" would refer to a 2% management fee and 20% profits going to hedge fund manager.
there can be a hurdle rate that the fund manager must surpass in order to earn a performance
fee. also can be a surrender fee when the fund is sold.
Major risk in hedge funds - CORRECT ANSWER-illiquidity, manager risk, investment strategy risk,
headline/regulatory risk, and the risk that there may be adverse tax consequences
Market directional - CORRECT ANSWER-includes equity long/short, short-selling, and activist
corporate restructuring - CORRECT ANSWER-includes distressed securities, merger arbitrage,
event driven, and regulation D offerings
convergence trading - CORRECT ANSWER-includes fixed-income arbitrage, convertible bond
arbitrage, equity market-neutral, and relative value arbitrage
opportunistic trading - CORRECT ANSWER-includes global macro funds and fund of funds
Venture Capital - CORRECT ANSWER-most well known type of private equity. Investors are
seeking a high rate of return but also taking on very high level of risk. returns are tied to market
performance so when the public stock markets are doing well so are investors.
Leveraged Buyouts (LBOs) - CORRECT ANSWER-to take a company private in order to repackage
and restructure the company and then return the company to the public market at a higher
price through and IPO. Or - to break up the company into several parts and sell off the diff parts
of the business to different bidders (cut and run)
Mezzanine financing - CORRECT ANSWER-essentially debt with an equity component. Often
found in the middle market- - companies that are not yet large enough to have ready access to
the capital markets but are larger than venture capital firms
VERIFIED CORRECT
ANSWERS GRADED A+
LATEST 100% GUARANTEED
PASS
Capital Market Line - CORRECT ANSWER-A graphical representation of the relationship between
risk and return, where risk is measured by standard deviation; the CML includes the concept of
a risk-free rate of return
Jenson Performance index - CORRECT ANSWER-Used in comparing performance money
managers on a risk-adjusted basis and can be used by itself. A number above 0.00 indicates the
manager had better performance than would be expected given the risk he took... vice versa
How are Treynor and Sharpe indexes best used? - CORRECT ANSWER-Both are used to compare
the risk - adjusted returns on diff funds. The higher the risk-adjusted return, the better. The key
diff is that Treynor uses Beta as its risk measure, so Treynor can only be used with fully
diversified portfolios. Sharpe, uses Standard deviation (total risk) as its measure of risk so can
only be used with either fully diversified or nondiversified portfolios
Benefits of Buy and hold - CORRECT ANSWER-returns at least as good as strategies based on
technical analysis, low transactional costs, the deferral of capital gains taxes on profits, not
missing the best days of the market
Property' value - CORRECT ANSWER-NOI/Cap Rate
, Typical hedge fund fees - CORRECT ANSWER-annual management fee (typically around 2%),
most have incentive (performance) fee between 10 and 20% of the funds profits. The term "2
and 20" would refer to a 2% management fee and 20% profits going to hedge fund manager.
there can be a hurdle rate that the fund manager must surpass in order to earn a performance
fee. also can be a surrender fee when the fund is sold.
Major risk in hedge funds - CORRECT ANSWER-illiquidity, manager risk, investment strategy risk,
headline/regulatory risk, and the risk that there may be adverse tax consequences
Market directional - CORRECT ANSWER-includes equity long/short, short-selling, and activist
corporate restructuring - CORRECT ANSWER-includes distressed securities, merger arbitrage,
event driven, and regulation D offerings
convergence trading - CORRECT ANSWER-includes fixed-income arbitrage, convertible bond
arbitrage, equity market-neutral, and relative value arbitrage
opportunistic trading - CORRECT ANSWER-includes global macro funds and fund of funds
Venture Capital - CORRECT ANSWER-most well known type of private equity. Investors are
seeking a high rate of return but also taking on very high level of risk. returns are tied to market
performance so when the public stock markets are doing well so are investors.
Leveraged Buyouts (LBOs) - CORRECT ANSWER-to take a company private in order to repackage
and restructure the company and then return the company to the public market at a higher
price through and IPO. Or - to break up the company into several parts and sell off the diff parts
of the business to different bidders (cut and run)
Mezzanine financing - CORRECT ANSWER-essentially debt with an equity component. Often
found in the middle market- - companies that are not yet large enough to have ready access to
the capital markets but are larger than venture capital firms
