2/11/2016 Questionmark Perception

Nov 02 2016 |
Logged in as : 8450327

Introduction
Alternative Investments
By accessing this assessment, you agree to the following terms of use: The practice tests and mock exams are provided to
currently registered CFA candidates. Candidates may view and print the exams for personal exam preparation only. The
following activities are strictly prohibited and may result in disciplinary and/or legal action: accessing or permitting access by
anyone other than currently registered CFA candidates and copying, posting to any website, e-mailing, distributing, and/or
reprinting the practice tests and mock exams for any purpose

Question
1 of 20
Which of the following characteristics of a target company is likely the least attractive for a leveraged
buyout?
Substantial amount of physical assets
High leverage
Strong and sustainable cash flow

Question
2 of 20
A real estate investor looking for equity exposure in the public market is most likely to invest in:
shares of real estate investment trusts.
real estate limited partnerships.
collateralized mortgage obligations.

Question
3 of 20
A least likely reason for investors to include commodity derivatives in their investment portfolios is:
it eliminates the need to understand the physical supply chain and general supply-demand dynamics of
a commodity.
commodity related stocks' positive correlation with the overall equity market.
the tendency for commodity prices to be positively correlated with inflation.

Question
4 of 20

https://ondemand.questionmark.com/delivery/perception.php?customerid=399691 1/5
2/11/2016 Questionmark Perception

Investors in alternative assets who seek liquidity are most likely to invest in:
real estate investment trusts.
hedge funds.
private equity.

Question
5 of 20
The market approach to valuing portfolio companies in private equity firms is most likely based on:
the value of assets minus the value of liabilities.
present value.
multiples.

Question
6 of 20
It is most likely true that with regard to commodities:
exposure is most commonly achieved via commodity derivatives.
they are physical products so most investors prefer to trade the actual commodity.
their returns are based on an income stream such as interest or dividends.

Question
7 of 20
Capital provided for companies moving toward operation but before commercial manufacturing and sales
have occurred best describes which stage in venture capital investing?
Later stage
Seed stage
Early stage

Question
8 of 20
Management fees for a private equity fund are most likely based on the:
total committed capital minus capital returned from investments that are exited.
fair value of assets under management.
drawdown of committed capital plus any undistributed capital gains.

Question
https://ondemand.questionmark.com/delivery/perception.php?customerid=399691 2/5
2/11/2016 Questionmark Perception

9 of 20
A hedge fund with an initial value of $100 million has a management fee of 2% and an incentive fee of 20%.
Management and incentive fees are calculated independently using end-of-period valuation. The value must reach
the previous high water mark before incentive fees are paid. The table below provides end-of-period fund values over
the next three years.

Fund Value ($ millions)

Year Before Fees After Fees
1 120 113.6
2 110 107.8
3 125 ?

The total amount of fees earned by the hedge fund in Year 3 is closest to:

$5.5 million.
$5.9 million.
$4.8 million.

Question
10 of 20
Which of the following is least likely to reduce the likelihood of being defrauded by a dishonest money
manager?
Independent verification of investment results
Strong and consistent reported investment performance
Third-party custody of assets under management

Question
11 of 20
The real estate valuation method that uses a discounted cash flow model is best characterized as:
a comparable sales approach.
an income approach.
a cost approach.

Question
12 of 20
Which of the following hedge fund strategies is most likely categorized as an event-driven strategy?
Quantitative Directional
Fixed-Income Convertible Arbitrage
Merger Arbitrage

Question
https://ondemand.questionmark.com/delivery/perception.php?customerid=399691 3/5
2/11/2016 Questionmark Perception

13 of 20
One hedge fund strategy that involves simultaneously holding short and long positions in common stock
is most likely:
quantitative directional.
distressed/restructuring.
volatility.

Question
14 of 20
Investors will most likely have difficulty managing diversification across hedge funds if the funds:
make decisions via investment committees.
seek to keep their strategies private.
fail to appoint chief risk officers.

Question
15 of 20
A commodity market is in contango when futures prices are:
the same as the spot price.
higher than the spot price.
lower than the spot price.

Question
16 of 20
A private equity firm sells a portfolio company to a buyer that is active in the same industry as the
portfolio company. This transaction is best described as a(n):
trade sale.
initial public offering.
secondary sale.

Question
17 of 20
The value at risk of an alternative investment is best described as the:
minimum amount of loss expected over a given time period at a given probability level.
probability of losing a fixed amount of money over a given time period.
time period during which a fixed amount is lost at a given probability level.

https://ondemand.questionmark.com/delivery/perception.php?customerid=399691 4/5
2/11/2016 Questionmark Perception

Question
18 of 20
The following information is available about a hedge fund:

Initial investment capital $100 million

Return at the end of one year 12%
Management fee based on assets under management 1%
Incentive fee based on the return net of the management fee 10%

Assume management fees are calculated using end-of-period valuation. The investor's net return given this fee
structure is closest to:

10.88%.
9.68%.
9.79%.

Question
19 of 20
If the level of broad inflation indices is largely determined by commodity prices, the average real yield
on direct commodity investments is most likely:
equal to zero.
greater than zero.
less than zero.

Question
20 of 20
Commodity futures prices are most likely in backwardation when:
interest rates are high.
the convenience yield is high.
storage costs are high.

https://ondemand.questionmark.com/delivery/perception.php?customerid=399691 5/5