Exam Name : AIM 2014

Total Questions : 60

Description :

Questions Which of the following statements is NOT true about alternative assets

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1 Alternative assets consistently generate higher alpha compared to traditional assets

2 Alternative assets are useful for diversification purpose

3 Alternative assets have lesser liquidity compared to traditional assets

4 Alternative assets have higher fees as compared to traditional assets

Questions An hedge fund earned a return of 42% in year 1 and -16% in year 2. Calculate the annualized holding period
return of an investor who invested at the beginning of year 1 and exited the fund at the end of year 2

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1 9.20%

2 19.30%

3 26.00%

4 13.00%

Questions Which of the portfolios is most likely appropriate for a client who has a high degree of risk tolerance? Fixed
Income Equity Alternate Investments Portfolio 1 25% 60% 15% Portfolio 2 60% 25% 15% Portfolio 3 15% 60
% 25%

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1 Portfolio 3

2 Portfolio 1

3 Portfolio 2

4 Either Portfolio 1 or 3
Questions John has calculated VAR of a portfolio. At 90% confidence interval, he estimate VAR to be USD 100,000.
Which of the following is correct interpretation of the same?

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1 One out of 10 days, the loss could exceed USD 100,000

2 One out of 100 days, the loss could exceed USD 100,000

3 One out of 90 days, the loss could exceed USD 100,000

4 One out of 10 days, the loss would be below USD 100,000

Questions A PE fund acquired 25% stake in a company for USD 25 million. The fund expects to sell its stake in the
company for USD 35 million in three years time. Calculate the rate of return earned on the investment
assuming no dividend payout during the three years.

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1 11.90%

2 40.00%

3 13.30%

4 46.70%

Questions Which of the following is closest definition of a venture capital firm?

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1 Venture capital is a type of private equity that is invested in very early stages of a company

2 Venture capital is a type of private equity that invests in joint ventures involving new technologies

3 Venture capital is a type of private equity that invests in unregistered share of public company

4 Venture capital is a type of private equity that invests in distressed firms

Questions Which of the following class of private equity has the highest rate of failures?

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1 Venture capital

2 Distressed Debt

3 Mezzanine Debt

4 Leveraged buy out

Questions What are resolutive conditions with regards to Real Estate Investment evaluation?

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1 Contingencies that cancel the contract if certain event occur

2 Contingencies that suspend the contract until certain events occur

3 Seller contingency, in which the seller accepts a contract from a buyer with a contingency

4 Purchase or sale of the real estate is contingent on a successful sale or purchase of another piece
of real estate

Questions Which of the following is an essential compliance requirement for a REIT?

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1 REIT should distribute a certain percentage of their profit as dividend every year

2 The main objective of a REIT is to develop and sell property

3 REIT cannot use leverage for buying new properties

4 In case of REIT, any profit from sale of property should only be used buy another property

Questions A mall in Orchard Road in Singapore had a gross annual income of SGD 4 million and net operating income
of SGD 2.8 million. The mall was recently sold for SGD 40 million. Calculate the gross income multiplier
(GIM) and capitalization rate (Cap rate) for the property.

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1 GIM: 10; Cap Rate: 7.0%

2 GIM: 14.3; Cap Rate: 7.0%

3 GIM: 10; Cap Rate: 10.0%

4 GIM: 14.3; Cap Rate: 10.0%

Questions The NAV of a hedge fund's unit which was at USD 74 at the beginning of the year reached its peak NAV of
USD 84 before falling down to USD 68 and eventually ended the year at USD 72. Calculate the drawdown of
the hedge fund during the year.

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1 16

2 12

3 2

4 10
Questions Calculate the expected rate of return of a portfolio falling on the Capital Market Line if the risk free rate of
return is 7%, expected market rate of return is 13%, standard deviation of the portfolio is 14% and standard
deviation of the market is 11%

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1 14.64%

2 23.55%

3 17.21%

4 11.71%

Questions Which of the following is true about capital market line (CML)?

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1 CML represents a portfolio that is constituted using the market portfolio and a risk free instrument

2 CML shows the relationship between risk free rate of return and beta

3 CML shows the relationship between individual securities return and their beta

4 CML shows the relationship between individual securities return and their standard deviation

Questions A portfolio had EUR 50 million at the beginning of the year. The market value of the fund increased to EUR 55
million after six months when a new investor invested another EUR 10 million into the fund. The value of the
fund at the end of the year was EUR 70 million. Calculate the time weighted average rate of return of the fund
.

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1 18.46%

2 8.80%

3 17.70%

4 37.00%

Questions A portfolio had EUR 50 million at the beginning of the year. The market value of the fund increased to EUR 55
million after three months when a new investor invested another EUR 10 million into the fund. The value of the
fund at the end of the year was EUR 70 million. Calculate the money weighted average rate of return.

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1 13.60%

2 8.30%

3 16.70%

4 20%
Questions A managed futures product of an hedge fund had an NAV of USD 24 on 01-Jan-2012. It reached its highest
NAV of USD 34 on 16-Jan-2013 and hit its lowest of USD 17 on 30-Jun-2015. The closing NAV on 31-Dec-
2015 was USD 26. Calculate the Calmar Ratio of the fund.

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1 0.05

2 0.25

3 0.19

4 0.37

Questions The minimum amount of margin a trader should maintain against his traded position is referred to as what?

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1 Maintenance Margin

2 Mark-to-market margin

3 Initial margin

4 Variation margin

Questions The return for non traditional alternative asset classes like collectibles typically would be influenced by

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1 idiosyncratic risk, Scarcity related premia, the persistence of inefficient markets, and the ability to
identify, verify, evaluate, source and secure sought after objects are the main drivers of return in
collectibles
2 Non-idiosyncratic risk, Scarcity related premia, the persistence of inefficient markets, and the ability
to identify, verify, evaluate, source and secure sought after objects are the main drivers of return in
collectibles
3 idiosyncratic risk, Non-Scarcity related premia, the persistence of inefficient markets, and the ability
to identify, verify, evaluate, source and secure sought after objects are the main drivers of return in
collectibles
4 idiosyncratic risk, Scarcity related premia, the persistence of efficient markets, and the ability to
identify, verify, evaluate, source and secure sought after objects are the main drivers of return in
collectibles
Questions What are “liquid” alternatives?

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1 Liquid alternatives (liquid alts) are alternative investment strategies that are available through
alternative investment vehicles such as mutual funds, ETFs, closed-end funds, etc. that provide
daily liquidity
2 Liquid alternatives (liquid alts) are alternative investment strategies that invests in liquid funds like
stocks, bonds etc that provide daily liquidity
3 Liquid alternatives (liquid alts) are alternative investment strategies that are available through
alternative investment vehicles such as mutual funds, ETFs, closed-end funds, etc. that provide
doesn't daily liquidity
4 There is nothing called Liquid Alternative. The fact that its alternative, it will not have liquidity unlike
shares and bonds

Questions Which of the following is the most important difference between a securitized debt and a secured debt?

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1 In a secured debt, the onus of repayment is still on the borrower whereas in case of securitized
debt, the repayment will be funded purely by the cash flow of the underlying asset
2 Secured debt can only be issued by a bank whereas securitized debt can be issued by anybody

3 Secured debt is always secured by real estate assets whereas securitized debt is secured by
mortgage loans
4 Both secured debt and securitized debt are similar except that the underling asset of securitized
debt is an underlying loan portfolio

Questions An investor holds equal number of Cipla and Ranbaxy scrips in his portfolio which he bought at Rs. 286.05
and Rs. 403.15 respectively. If the current prices of these scrips are Rs. 322 and 399.2, the portfolio return
will be

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1 4.64%

2 12.57%

3 11.59%

4 13.55%

Questions An investor holds a portfolio of securities consisting of Tata Motors, TCS, and Infosys with weights of 20%,
20% and 60% respectively. If the Beta of these securities is 1.15, 1.65, and 2.45 respectively, what would be
the portfolio Beta?

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1 1.96

2 1.71

3 1

4 1.25
Questions If stock return is 13%, market return is 20%, and risk free rate of return is 6.50%, the beta of security is

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1 0.48

2 1

3 0.5

4 0.98

Questions If the variance of a portfolio is 25, the standard deviation would be:

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1 5

2 10

3 125

4 30

Questions The unexplained variance or residual variance is represented byL

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1 Unsystematic Risk

2 Systematic Risk

3 Total Risk

4 Beta Coefficient

Questions _______ indicates the sensitivity of security returns to the changes in market return.

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1 ?i

2 ?i

3 ?i

4 R
Questions According to Sharpe model, the variance explained by the index is known as:

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1 Systematic Risk

2 Unsystematic risk

3 Systemic Risk

4 None of the Above

Questions Dr. Reddy's was quoted at Rs. 732.33 in 2007 and Rs. 468.65 in 2008. The company declared a dividend of
200% in 2008. If the face value of a share is Rs. 5 per share, what would be the return of the company for
2008?

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1 -253.65

2 -263.65

3 253.65

4 673.65

Questions ______ can be used as a benchmark measuring rod for evaluating portfolio performance:

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1 Mutual Funds

2 CAPM

3 NAV

4 NIFTY

Questions An investor can redeem open ended funds and get money from:

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1 Issuer

2 Stock Exchanges

3 Brokers

4 Banks
Questions If the average annual return of a portfolio is 9.5% with a risk-free return of 8.25% and standard deviation of 0.
0789, what will be Sharpe's performance index?

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1 0.158

2 1.58

3 0.58

4 0.0158

Questions The excess average return of a portfolio is 10.5%, beta is 1.35, and excess average return of the market is 9.
5%. The Jensens's portfolio performance measure is:

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1 -2.325

2 2.325

3 -2.323

4 -3.235

Questions Excess average return of a protfolio A is 10.5%, beta is 1.35, and excess average market return is 9.5%. The
same data for portfolio B is 8.5, 0.95, and 7.5% respectively. Which portfolio is a better performer as per
Jensen's performance measure?

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1 B is better than A

2 A is better than B

3 Both are equal

4 Both are poor

Questions The _______ is the relationship betweeen the funds return and the market return.

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1 Characteristic Line

2 SML

3 CML

4 None of the Above

Questions ________ gives a summary measure for portfolio performance by properly adjusting the risk.

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1 Sharpe Performance Index

2 Jensen's Measure

3 Treynor Index

4 Markowitz Index

Questions In tactical asset allocation strategy, the portfolio manager splits the funds into stocks and bonds after
analysing and finding out which classes of assets will perform better in the coming period.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions Indexing enables the portfolio manager to idenftify tracking error, which indicates the deviation of individual
security return from the index return.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions Portfolio revision depends greatly on the investor's perception on risk and return.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED
Questions Under variable ratio plan, the investor has the freedom to revise portfolio components.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions The difference between domestic and international portfolios is the exposure to currency and country risk
besides market and price risk.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions The study conducted by ______ revealed that default risk, time premium, deflation and change in expected
sales turnover contributed to 25% of the variation in S&P Composite Index

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1 Burmeister and McElroy

2 Chen, Roll & Ross

3 Ross & Roll

4 Fama and French

Questions The fourth factor to the Fama & French model added by Carhart is _______

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1 Momentum Factor

2 Efficiency Factor

3 Price Factor

4 Time Factor
Questions Efficient Market Hypothesis is a theory developed by Fama and French in 1960

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1 FALSE

2 TRUE

3 CAN'T BE DETERMINED

Questions Ability to process information and taking quick action make a market strong, semi strong or weak

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions A strong form of market discounts all information, sometimes including invalid information like rumours

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions Liquidity traders are analyzing the information available currently and trade, to increase their liquidity and
profits

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1 FALSE

2 TRUE

3 CAN'T BE DETERMINED

Questions The Run test is also known as the Geary test, and it is a non-parametric statistical test

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED
Questions One way of testing market efficiency is to find out whether any stock has given any Abnormal Average Return
during an event day

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions Insider information is the information of a corporate, which includes material non-public (privileged)
information on the affairs, operations, or financial positions of a corporation that can affect the stock price
which is publically traded in an exchange.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions Yield from real estate represents

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1 Rent+Capital Appreciation

2 Rent

3 Interest is paid in cash periodically

4 Dividend

Questions If the interest rate offered by a bank on a one year fixed deposit is 5.75%, the annual rate of inflation is 6.75
%, then the effective rate of return on deposit is

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1 -1%

2 1%

3 12.50%

4 -12.50%
Questions Mr. X bought 100 shares of Wipro (face value of Rs. 2) for Rs. 525 per share, and held the shares for one
year. During the period, the company paid a dividend at the rate of 45% per share, and also issued bonus
shares at the ratio of 1:1. At the end of one year, the market price of Wipro shares became Rs. 419. The
max rate of return for Mr. X is:

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1 60.30%

2 -19.58%

3 0.69%

4 -20.20%

Questions A year ago, you invested $2000 in a savings account that pays an annual interest rate of 6%. What is your
approximate annual real rate of return if the rate of inflation was 3% over the year?

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1 3%

2 4%

3 10%

4 7%

Questions Volatility is one of the factors affecting option prices.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED

Questions A change in the government in power can have a favourable or adverse impact on the stock market.

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1 TRUE

2 FALSE

3 CAN'T BE DETERMINED
Questions Shares which are not affected by the market movements are known as:

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1 Defensive Shares.

2 Offensive Shares

3 Growth Shares

4 Income Shares

Questions Commercial papers are issued in denominations of:

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1 Rs. 5 lakhs

2 Rs. 10 lakhs

3 Rs. 15 lakhs

4 Rs. 50 lakhs

Questions Which of the following tangible assets is most likely to attract fraudsters?

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1 Gemstones.

2 Film financing.

3 Antiques and fine art.

4 Forestory

Questions If an investor is keen to invest in fine wine, what proportion of the portfolio should this take up?

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1 7-8%

2 10-15%

3 5-10%

4 2-3%
Questions Why is the sale of wine not normally subject to capital gains tax?

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1 It is treated as a wasting and Diminishing asset.

2 It is treated as a diminishing asset.

3 It is treated as a private consumption asset.

4 It is treated as an income producing asset.