Question 1

Unlike mutual funds, hedge funds

Accepted Answer

A)   allow private investors to pool assets to be managed by a fund manager.
B)   are commonly organized as private partnerships.
C)   are subject to extensive SEC regulations.
D)   are typically only open to wealthy or institutional investors.
E)   are commonly organized as private partnerships and are typically only open to wealthy or institutional investors.F) A) and E)
G) None of the above

Question 2

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $1,000,000 and ended the year at 1,120,000?

Accepted Answer

A)   8.96%
B)   10.96%
C)   11.30%
D)   12.00%E) A) and B)
F) A) and C)

Question 3

Hedge funds may invest or engage in

Accepted Answer

A)   distressed firms.
B)   convertible bonds.
C)   currency speculation.
D)   merger arbitrage.
E)   All of the options are correct.F) B) and D)
G) None of the above

Question 4

A hedge fund pursuing a ______ strategy is trying to exploit relative mispricing within a market but is hedged to avoid taking a stance on the direction of the broad market.

Accepted Answer

A)   directional
B)   nondirectional
C)   market neutral
D)   arbitrage or speculation
E)   nondirectional and market neutralF) All of the above
G) C) and D)

Question 5

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $2,000,000 and ended the year at 2,300,000?

Accepted Answer

A)   8.96%
B)   10.96%
C)   11.30%
D)   12.00%E) All of the above
F) B) and D)

Question 6

Assume that you manage a $1.3 million portfolio that pays no dividends and has a beta of 1.45 and an alpha of 1.5% per month. Also, assume that the risk-free rate is 0.025% (per month)  and the S&P 500 is at 1,220. If you expect the market to fall within the next 30 days, you can hedge your portfolio by ______ S&P 500 futures contracts (the futures contract has a multiplier of $250) .

Accepted Answer

A)   selling 1
B)   selling 6
C)   buying 1
D)   buying 6
E)   selling 4F) B) and D)
G) A) and E)

Question 7

The risk profile of hedge funds ______, making performance evaluation ______.

Accepted Answer

A)   can shift rapidly and substantially; challenging
B)   can shift rapidly and substantially; straightforward
C)   is stable; challenging
D)   is stable; straightforward
E)   None of the options are correct.F) A) and E)
G) None of the above

Question 8

The typical hedge fund fee structure is

Accepted Answer

A)   a management fee of 1% to 2%.
B)   an annual incentive fee equal to 20% of investment profits beyond a stipulated benchmark performance.
C)   a 12-b1 fee of 1%.
D)   a management fee of 1% to 2% and an annual incentive fee equal to 20% of investment profits beyond a stipulated benchmark performance.
E)   a management fee of 1% to 2% and a 12-b1 fee of 1%.F) A) and C)
G) B) and D)

Question 9

Hedge funds are ______ transparent than mutual funds because of ______ strict SEC regulation on hedge funds.

Accepted Answer

A)   more; more
B)   more; less
C)   less; less
D)   less; moreE) B) and D)
F) None of the above

Question 10

The previous value of a portfolio that must be reattained before a hedge fund can charge incentive fees is known as a

Accepted Answer

A)   benchmark.
B)   water stain.
C)   water mark.
D)   high water mark.
E)   low water mark.F) A) and B)
G) C) and D)

Question 11

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $4,000,000 and ended the year at 5,300,000?

Accepted Answer

A)   28.65%
B)   26.87%
C)   24.95%
D)   22.00%E) A) and D)
F) A) and C)

Question 12

A hedge fund attempting to profit from a change in the spread between mortgages and Treasuries is using a ______ strategy.

Accepted Answer

A)   market neutral
B)   directional
C)   relative value
D)   divergence
E)   convergenceF) A) and E)
G) A) and D)

Exam 26: Hedge Funds

A hedge fund attempting to profit from a change in the spread between mortgages and Treasuries is using a ______ strategy.

Correct Answer
verified

Correct Answer
verified

Hedge funds are transparent than mutual funds because of strict SEC regulation on hedge funds.

Correct Answer
verified

The previous value of a portfolio that must be reattained before a hedge fund can charge incentive fees is known as a

Correct Answer
verified

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $2,000,000 and ended the year at 2,300,000?

Correct Answer
verified

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $1,000,000 and ended the year at 1,120,000?

Correct Answer
verified

Unlike mutual funds, hedge funds

Correct Answer
verified

The risk profile of hedge funds , making performance evaluation .

Correct Answer
verified

Hedge funds may invest or engage in

Correct Answer
verified

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $4,000,000 and ended the year at 5,300,000?

Correct Answer
verified

The typical hedge fund fee structure is

Correct Answer
verified

A hedge fund pursuing a ______ strategy is trying to exploit relative mispricing within a market but is hedged to avoid taking a stance on the direction of the broad market.

Correct Answer
verified

Exam 26: Hedge Funds

A hedge fund attempting to profit from a change in the spread between mortgages and Treasuries is using a ______ strategy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Hedge funds are ______ transparent than mutual funds because of ______ strict SEC regulation on hedge funds.

Correct AnswerverifiedShow Answer

The previous value of a portfolio that must be reattained before a hedge fund can charge incentive fees is known as a

Correct AnswerverifiedShow Answer

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $2,000,000 and ended the year at 2,300,000?

Correct AnswerverifiedShow Answer

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $1,000,000 and ended the year at 1,120,000?

Correct AnswerverifiedShow Answer

Unlike mutual funds, hedge funds

Correct AnswerverifiedShow Answer

The risk profile of hedge funds ______, making performance evaluation ______.

Correct AnswerverifiedShow Answer

Hedge funds may invest or engage in

Correct AnswerverifiedShow Answer

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. What is the Net IRR to the investors if over the course of a year if AUM started at $4,000,000 and ended the year at 5,300,000?

Correct AnswerverifiedShow Answer

The typical hedge fund fee structure is

Correct AnswerverifiedShow Answer

A hedge fund pursuing a ______ strategy is trying to exploit relative mispricing within a market but is hedged to avoid taking a stance on the direction of the broad market.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Hedge funds are transparent than mutual funds because of strict SEC regulation on hedge funds.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The risk profile of hedge funds , making performance evaluation .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified