CAIA Exam 1 Chapter 1 Questions and Answers Already Passed
Alternative investments - Answers Alternative investments are sometimes viewed as including
any investment that is not simply a long position in traditional investments.
Fixed-Income Securities - Answers A fixed income security is an investment that provides a
return in the form of fixed periodic payments and the eventual return of principal at maturity.
Private equity - Answers Private equity is capital that is not listed on a public exchange. Private
equity is composed of funds and investors that directly invest in private companies, or that
engage in buyouts of public companies, resulting in the delisting of public equity. Institutional
and retail investors provide the capital for private equity, and the capital can be utilized to fund
new technology, make acquisitions, expand working capital, and to bolster and solidify a
balance sheet.
Private Debt - Answers Private debt is the debt accumulated by individuals or private businesses.
Private debt can take numerous forms; a personal loan, credit card, corporate bond or business
loan for instance.
Traditional Investments - Answers Typically, traditional investments include publicly traded
equities, fixed-income securities, and cash. For example, if a particular investment (such as
private equity) is not commonly covered as equity in books on investing, then many people
would view it as an alternative investment.
Deferred Consumption - Answers Saving is income not spent, or deferred consumption.
Investment - Answers A good definition of an investment is that it is deferred consumption. Any
net outlay of cash made with the prospect of receiving future benefits might be considered an
investment. So investments can range from planting a tree to buying stocks to acquiring a
college education.
Institutional Quality Investment - Answers is the type of investment that financial institutions
such as pension funds or endowments might include in their holdings because they are
expected to deliver reasonable returns at an acceptable level of risk. For example, a pension
fund would consider holding the publicly traded equities of a major corporation but may be
reluctant to hold collectibles such as baseball cards or stamps.
Also, investments in very small and very speculative projects are typically viewed as being
inappropriate for such an institution due to its responsibility to select investments that offer
suitable risk levels and financial return prospects for its clients.
Major Alternative Asset Catagories - Answers 38% hedge funds
30% Real Assets
29% Private Equity
Alternative investments - Answers Alternative investments are sometimes viewed as including
any investment that is not simply a long position in traditional investments.
Fixed-Income Securities - Answers A fixed income security is an investment that provides a
return in the form of fixed periodic payments and the eventual return of principal at maturity.
Private equity - Answers Private equity is capital that is not listed on a public exchange. Private
equity is composed of funds and investors that directly invest in private companies, or that
engage in buyouts of public companies, resulting in the delisting of public equity. Institutional
and retail investors provide the capital for private equity, and the capital can be utilized to fund
new technology, make acquisitions, expand working capital, and to bolster and solidify a
balance sheet.
Private Debt - Answers Private debt is the debt accumulated by individuals or private businesses.
Private debt can take numerous forms; a personal loan, credit card, corporate bond or business
loan for instance.
Traditional Investments - Answers Typically, traditional investments include publicly traded
equities, fixed-income securities, and cash. For example, if a particular investment (such as
private equity) is not commonly covered as equity in books on investing, then many people
would view it as an alternative investment.
Deferred Consumption - Answers Saving is income not spent, or deferred consumption.
Investment - Answers A good definition of an investment is that it is deferred consumption. Any
net outlay of cash made with the prospect of receiving future benefits might be considered an
investment. So investments can range from planting a tree to buying stocks to acquiring a
college education.
Institutional Quality Investment - Answers is the type of investment that financial institutions
such as pension funds or endowments might include in their holdings because they are
expected to deliver reasonable returns at an acceptable level of risk. For example, a pension
fund would consider holding the publicly traded equities of a major corporation but may be
reluctant to hold collectibles such as baseball cards or stamps.
Also, investments in very small and very speculative projects are typically viewed as being
inappropriate for such an institution due to its responsibility to select investments that offer
suitable risk levels and financial return prospects for its clients.
Major Alternative Asset Catagories - Answers 38% hedge funds
30% Real Assets
29% Private Equity
