IFIC Chapter 13 questions with complete
solutions rated A+
PPNs - correct answer ✔✔What is this? Structured as debt instrument that include a principal guarantee
and interest payments. Performance is tied to an underlying asset. Risk include liquidity, credit and
currency risk
Hedge Funds - correct answer ✔✔What is this? Lightly regulated pools of capital run by managers who
have great flexibility in strategy. Focus is on absolute returns in any market condition. lower correlation
with traditional asset classes.
Risks:
-complex investment strategy
-lack of regulation
-market and liquidity risk.
Commodity Pools - correct answer ✔✔What is this?
Structured as managed futures that are structured and sold as mutual funds. They actively trade
derivatives products and physical commodities.
Closed-End Funds - correct answer ✔✔A managed pool of securities traded on a stock exchange that has
a fixed # of shares. They are not necessarily traded on net asset value
Exchange-traded Funds - correct answer ✔✔Baskets of securities that are constructed like mutual funds
but traded like individual stocks on an exchange. Similar to index mutual funds in that they will hold the
same stocks, bonds as those in a mrket index. ETFs traded more easily than MFs
Segregated Fund - correct answer ✔✔An insurance contract with 2 parts: an investment that produces
the return and an insurance policy that covers the risk.
1. contract holder - the person who bought the contract
solutions rated A+
PPNs - correct answer ✔✔What is this? Structured as debt instrument that include a principal guarantee
and interest payments. Performance is tied to an underlying asset. Risk include liquidity, credit and
currency risk
Hedge Funds - correct answer ✔✔What is this? Lightly regulated pools of capital run by managers who
have great flexibility in strategy. Focus is on absolute returns in any market condition. lower correlation
with traditional asset classes.
Risks:
-complex investment strategy
-lack of regulation
-market and liquidity risk.
Commodity Pools - correct answer ✔✔What is this?
Structured as managed futures that are structured and sold as mutual funds. They actively trade
derivatives products and physical commodities.
Closed-End Funds - correct answer ✔✔A managed pool of securities traded on a stock exchange that has
a fixed # of shares. They are not necessarily traded on net asset value
Exchange-traded Funds - correct answer ✔✔Baskets of securities that are constructed like mutual funds
but traded like individual stocks on an exchange. Similar to index mutual funds in that they will hold the
same stocks, bonds as those in a mrket index. ETFs traded more easily than MFs
Segregated Fund - correct answer ✔✔An insurance contract with 2 parts: an investment that produces
the return and an insurance policy that covers the risk.
1. contract holder - the person who bought the contract
