CAIA Sample 2 Exam Questions And Answers 100% Verified

CAIA Sample 2 Exam Questions And Answers 100% Verified Samuel Tong, CAIA, has clients who await his recommendation of a particular stock that is about to release earnings. From his office he sends the single recommendation "Sell" to all his clients via a text message that includes the phrase "more info on web." Does this communication violate Standard V(B): Communication with Clients and Prospective Clients? - answerNo A communication may be in capsule form but members should notify clients that additional information and analyses are available from the producer of the report Standard VI(A): Disclosure of Conflicts states that members and candidates must make - answerfull and fair disclosure of all matters that could reasonably be expected to impair the independence and objectivity or interfere with respective duties to their clients, prospective clients, and employer. Even friends. Standard IV(C): Responsibilities of Supervisors states that members and candidates must make reasonable efforts to ensure that anyone subject to their supervision or authority complies with applicable laws, rules, regulations, and the Code and Standards. - answerMr. Malone has committed no violation. He has informed his supervisor, the CEO, of the model changes. It is the CEO's responsibility to inform the investors. Maxwell Chalmers, CAIA, is the founder of and a partner in a quantitative hedge fund. He has developed a proprietary factor model that tracks social media patterns to identify market supply and demand trends. His model was developed and tested using 12 months of data. Based on the evidence, he concludes that the model will generate trading signals that will result in outperformance over the coming 24 months. Mr. Chalmers has prepared a research report in which he clearly explains these elements, and he has distributed the report to the fund's partners, but not to his clients. In the report, he makes a recommendation that the fund implement the model. What standard has Mr. Chalmers violated? - answerStandard V(A): Diligence and Reasonable Basis states that members and candidates must have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action. In this case, because Mr. Chalmers used only 12 months of data (a time horizon that is likely to be too short to incorporate both positive and negative market cycles) to project over the coming 24 months, he has failed to exercise a reasonable basis in his analysis. According to the guidance section for Standard I(B): Independence and Objectivity, members and candidates who are responsible for hiring and retaining outside managers should not - answeraccept gifts, entertainment, or travel funding that may be perceived as impairing their decisions. According to Standard VI(C): Referral Fees, members and candidates must inform their clients and employer about - answerservices that would be received as well as an estimate of the value of those services. In this case, general disclosure (to the clients and to the employer) is recommended. Standard IV(A): Loyalty does not preclude one from opening an independent practice. - answerHowever, before opening such a practice, one should obtain authorization from his or her current employer. Thus, Ms. Sikorska must obtain authorization. Absolute return standard means that returns are evaluated relative to - answerthe riskless rate, or zero, and therefore independently of performance in equity markets, debt markets, or any other markets. What alternative investment category includes both mezzanine and distressed debt - answerPrivate equity Private equity investments include - answerventure capital (funding new ventures), leveraged buyouts (LBOs) of existing businesses, mezzanine financing of LBOs or other ventures, and distressed debt investing The tax consequences to fund investors are not determined at the master trust level but instead at the investor's country of domicile based on the relevant feeder fund. - answerFor example, investors in the onshore U.S. based feeder fund are subject to the U.S. Internal Revenue Code, whereas investors in the offshore feeder fund are subject to the tax codes of their respective domiciles What action is most likely to be triggered when the long side of a futures position fails to meet the maintenance margin requirement? - answerThe long side's position is closed into the market and a new counterparty steps in Which of the following best describes heteroskedasticity in the context of regression? - answerVariation in the variance of regression errors Which of the following is a typical tax-related consequence of offshore master trust structures? - answerInvestors are taxed only in their country of domicile The purpose of an offshore master trust structure is to invest assets of both the onshore fund and the offshore fund in a consistent manner. This ensures that all investors benefit from the fund manager's insights while ensuring that investors get taxed only in their country of domicile Market backwardation takes place when - answerthe forward price is less than the current spot price, due to the fact that the coupon yield is greater than the risk-free rate A statistical arbitrage manager in the alternative investments group of a large global bank has computed a Jarque-Bera statistic of 10.0 for a test with a critical value of 7.38. Which of the following best describes the proper interpretation of this test result? - answerReject normality at the stated level of confidence The Jarque-Bera test is a popular test for normality. The critical value indicates the level of confidence for the Jarque-Bera test. If the test statistic measured is greater than the critical value, the null hypothesis of normality is rejected at the stated level of confidence The funds analyzed by a quantitative analyst for a large fund of hedge funds report performance using different time intervals (e.g., weekly versus monthly). In this situation, what type of return calculation is recommended to ensure internal consistency when aggregating performance data for the various funds? - answerLog returns, or continuously compounded returns, allow for modeling of different time intervals in a process that is internally consistent. Chicago Mercantile Exchange (CME) corn futures contracts call for the short position to deliver to the long 5,000 bushels at a specified date. A trader establishes a short position of 10 contracts at the price of $6.50 per bushel. At the end of the trading day, the market price of the futures contract drops to $6.49. If the trader initially posts collateral of $0.50 per bushel, what will be the trader's ending cash balance? - answerInitial collateral: 10 contracts x 5,000 bushels x $0.50 per bushel = $25,000 Short side increases $0.01 per bushel x 5,0