Hooray, you’ve done it! You’ve come to the final post of our Level 1 Q&A Blog. Did the questions help you revise and stay on top of your game? Let us know in the comments below! Good luck for the exams.
1. Which of the following factors is most likely to be a characteristic of alternative investments?
A. Narrow manager specialization.
B. High regulation.
C. High transparency.
2. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation.
If the incentive and management fees are calculated independently, the fees earned by SHM is closest to:
A. $7.680 million.
B. $14.928 million.
C. $16.080 million.
3. The value at risk of an alternative investment is best described as the:
A. Fixed amount of loss expected over a given time period at a given probability level.
B. Maximum amount of loss expected over a given time period at a given probability level.
C. Minimum amount of loss expected over a given time period at a given probability level.