CAIA LEVEL 1 PRACTICE EXAM
QUESTIONS WITH CORRECT ANSWERS
Which of the following investments is most likely to be considered an institutional quality
alternative investment?
A. Vintage Wine Collection
B. Long/Short Equity Hedge Fund
C. High-Yield Corporate Bond Fund
D. Small Cap Equity Index Fund - Answer-B. Institutional-quality alternative investments
exhibit risk and return characteristics that are acceptable to institutional investors.
Institutional investors have risk and return objectives that prevent them from investing in
very small or highly speculative assets, but as a group, are generally able to invest in
the four categories of alternative investments. A long/short equiyt hedge fund fits within
the requirements of institutional-quality alternative assets.
Institutionas may also invest in high-yield bonds or small cap stocks, but these would be
considered traditional rather than alternative
Which of the following alternative asset classes would grant an investor with a long
position direct control of a nonfinancial asset representing actual consumption rights?
A. Real Assets
B. Hedge Funds
C. Private Equity
D. Structured Products - Answer-A. Real Assets are associated with investments that
directly control nonfinancial assets and represent actual rights to consumption rather
than indirect financial claims to cash flows generated by a firm. Real Assests include
real estate, infrastructure, intellectual property, natural resources and commodities
The CIO of the Bentley Endowment has given his managers a directive to increase the
allocation of the portfolio's funds into alternative investments. Which of the following
statements will be least beneficial in meeting this directive?
A. Small-Cap Stock Funds
B. A long/short hedge fund
C. Intellectual Property Investments
D. A distressed debt private equity fund - Answer-A. Small-cap stock funds are a type of
mutual fund that , while likely riskier than large and mid-cap funds, will still fall into the
traditional investment category.
A long/short hedge fund, intellectual property, and a distressed debt private equity fund
are all considered alternative investments.
Which of the following least likely describes the trend in institutional investing over the
last century?
A. Government Debt was popular prior to 1920
QUESTIONS WITH CORRECT ANSWERS
Which of the following investments is most likely to be considered an institutional quality
alternative investment?
A. Vintage Wine Collection
B. Long/Short Equity Hedge Fund
C. High-Yield Corporate Bond Fund
D. Small Cap Equity Index Fund - Answer-B. Institutional-quality alternative investments
exhibit risk and return characteristics that are acceptable to institutional investors.
Institutional investors have risk and return objectives that prevent them from investing in
very small or highly speculative assets, but as a group, are generally able to invest in
the four categories of alternative investments. A long/short equiyt hedge fund fits within
the requirements of institutional-quality alternative assets.
Institutionas may also invest in high-yield bonds or small cap stocks, but these would be
considered traditional rather than alternative
Which of the following alternative asset classes would grant an investor with a long
position direct control of a nonfinancial asset representing actual consumption rights?
A. Real Assets
B. Hedge Funds
C. Private Equity
D. Structured Products - Answer-A. Real Assets are associated with investments that
directly control nonfinancial assets and represent actual rights to consumption rather
than indirect financial claims to cash flows generated by a firm. Real Assests include
real estate, infrastructure, intellectual property, natural resources and commodities
The CIO of the Bentley Endowment has given his managers a directive to increase the
allocation of the portfolio's funds into alternative investments. Which of the following
statements will be least beneficial in meeting this directive?
A. Small-Cap Stock Funds
B. A long/short hedge fund
C. Intellectual Property Investments
D. A distressed debt private equity fund - Answer-A. Small-cap stock funds are a type of
mutual fund that , while likely riskier than large and mid-cap funds, will still fall into the
traditional investment category.
A long/short hedge fund, intellectual property, and a distressed debt private equity fund
are all considered alternative investments.
Which of the following least likely describes the trend in institutional investing over the
last century?
A. Government Debt was popular prior to 1920
