CFA Exam Alternatives Questions And
Answers With Verified Solutions 100%
Correct!!!
Victrix is a hedge fund that has a 3-and-15 fee structure. Compared to hedge funds
with 2-and-20 fee structures, Victrix charges higher:
A)management fees.
B)load fees.
C)incentive fees. - ANSWER✔✔management fees
In a 2-and-20 hedge fund fee structure, the "2" refers to a hedge fund's
A)management fee.
B)incentive fee.
C)redemption fee. - ANSWER✔✔management fee
Indices for alternative investments are least likely to exhibit:
A)backfill bias.
B)time-period bias.
C)survivorship bias. - ANSWER✔✔time-period bias
The value of an existing single-family home used for residential purposes will
most likely be calculated using the:
A)cost approach.
B)income approach.
C)sales comparison approach. - ANSWER✔✔sales comparison approach
,An investor made an investment in a hedge fund at the beginning of the year, when
the NAV after fees was €80 million. The NAV after fees for Year 1 was €75
million. For Year 2, the end-of-year value before fees is €90 million. The fund has
a 2 and 20 fee structure. Management fees are paid independently of incentive fees
and are calculated on end-of-year values. Incentive fees are calculated using a high
water mark and a soft hurdle rate of 2%. Total fees paid for Year 2 are:
A)€5.8 million.
B)€4.4 million.
C)€3.8 million. - ANSWER✔✔3.8 million
Which of the following is least likely an important element of risk management for
alternative investment funds?
A)Obtaining independent valuations of fund positions.
B)Designating a risk management officer who also works as part of the investment
team.
C)Setting leverage limits. - ANSWER✔✔Designating a risk management officer
who also works as part of the investment team.
Which of the following is least likely a type of hedge fund strategy?
A)Event-driven.
B)Exchange-traded.
C)Market-neutral. - ANSWER✔✔Exchange-traded
Bulldog Fund is a hedge fund with a value of £100 million at the beginning of the
year. Bulldog Fund charges 1.5% management fee based on assets under
management at the end of the year and a 25% incentive fee with no hurdle rate.
Incentive fees are calculated independent of management fees. The fund's value at
the end of year before fees is £120 million. Compared to a 2 and 20 fee structure,
Bulldog Fund's total fees for the year are:
, A)higher.
B)lower.
C)the same. - ANSWER✔✔higher
Which of the following best describes a benefit from investing in commodities?
Commodities:
A)can serve as a hedge against inflation.
B)have a strong positive correlation with stock and bond prices.
C)benefit from markets oscillating between contango and backwardation. -
ANSWER✔✔can serve as a hedge against inflation
The yield from an investment in commodities that results from a difference
between the spot price and a futures price is the:
A)roll yield.
B)collateral yield.
C)convenience yield. - ANSWER✔✔roll yield
Which of the following statements is least likely a risk management consideration
for alternative investments?
A)Alternative investment returns should reflect a premium to compensate investors
for a lack of liquidity.
B)Historical returns and standard deviations may not reflect future returns and
volatility for alternative investments.
C)The standard deviation of alternative investment returns may be misleading
because returns distributions tend to be positively skewed. - ANSWER✔✔The
standard deviation of alternative investment returns may be misleading because
returns distributions tend to be positively skewed
Answers With Verified Solutions 100%
Correct!!!
Victrix is a hedge fund that has a 3-and-15 fee structure. Compared to hedge funds
with 2-and-20 fee structures, Victrix charges higher:
A)management fees.
B)load fees.
C)incentive fees. - ANSWER✔✔management fees
In a 2-and-20 hedge fund fee structure, the "2" refers to a hedge fund's
A)management fee.
B)incentive fee.
C)redemption fee. - ANSWER✔✔management fee
Indices for alternative investments are least likely to exhibit:
A)backfill bias.
B)time-period bias.
C)survivorship bias. - ANSWER✔✔time-period bias
The value of an existing single-family home used for residential purposes will
most likely be calculated using the:
A)cost approach.
B)income approach.
C)sales comparison approach. - ANSWER✔✔sales comparison approach
,An investor made an investment in a hedge fund at the beginning of the year, when
the NAV after fees was €80 million. The NAV after fees for Year 1 was €75
million. For Year 2, the end-of-year value before fees is €90 million. The fund has
a 2 and 20 fee structure. Management fees are paid independently of incentive fees
and are calculated on end-of-year values. Incentive fees are calculated using a high
water mark and a soft hurdle rate of 2%. Total fees paid for Year 2 are:
A)€5.8 million.
B)€4.4 million.
C)€3.8 million. - ANSWER✔✔3.8 million
Which of the following is least likely an important element of risk management for
alternative investment funds?
A)Obtaining independent valuations of fund positions.
B)Designating a risk management officer who also works as part of the investment
team.
C)Setting leverage limits. - ANSWER✔✔Designating a risk management officer
who also works as part of the investment team.
Which of the following is least likely a type of hedge fund strategy?
A)Event-driven.
B)Exchange-traded.
C)Market-neutral. - ANSWER✔✔Exchange-traded
Bulldog Fund is a hedge fund with a value of £100 million at the beginning of the
year. Bulldog Fund charges 1.5% management fee based on assets under
management at the end of the year and a 25% incentive fee with no hurdle rate.
Incentive fees are calculated independent of management fees. The fund's value at
the end of year before fees is £120 million. Compared to a 2 and 20 fee structure,
Bulldog Fund's total fees for the year are:
, A)higher.
B)lower.
C)the same. - ANSWER✔✔higher
Which of the following best describes a benefit from investing in commodities?
Commodities:
A)can serve as a hedge against inflation.
B)have a strong positive correlation with stock and bond prices.
C)benefit from markets oscillating between contango and backwardation. -
ANSWER✔✔can serve as a hedge against inflation
The yield from an investment in commodities that results from a difference
between the spot price and a futures price is the:
A)roll yield.
B)collateral yield.
C)convenience yield. - ANSWER✔✔roll yield
Which of the following statements is least likely a risk management consideration
for alternative investments?
A)Alternative investment returns should reflect a premium to compensate investors
for a lack of liquidity.
B)Historical returns and standard deviations may not reflect future returns and
volatility for alternative investments.
C)The standard deviation of alternative investment returns may be misleading
because returns distributions tend to be positively skewed. - ANSWER✔✔The
standard deviation of alternative investment returns may be misleading because
returns distributions tend to be positively skewed
