Question 1

Hedge funds ______ engage in market timing ______ take extensive derivative positions.

Accepted Answer

A)  cannot;and cannot 
B)  cannot;but can 
C)  can;and can 
D)  can;but cannot 
E)  none of these 
A)  cannot;and cannot 
B)  cannot;but can 
C)  can;and can 
D)  can;but cannot 
E)  none of these

Question 2

Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000.If Diversified's NAV was $42.13,how many shares must have been held in the fund?

Accepted Answer

A)  43,000,000 
B)  6,488,372 
C)  5,601,709 
D)  1,182,203 
E)  None of these. 
A)  43,000,000 
B)  6,488,372 
C)  5,601,709 
D)  1,182,203 
E)  None of these.

Question 3

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)  B and D 
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)  B and D

Question 4

Shares in hedge funds are priced

Accepted Answer

A)  at NAV 
B)  a significant premium to NAV 
C)  a significant discount from NAV 
D)  B or C 
E)  none of these 
A)  at NAV 
B)  a significant premium to NAV 
C)  a significant discount from NAV 
D)  B or C 
E)  none of these

Question 5

The minimum investment in some new hedge funds is as low as $______,compared to a traditional minimum of $______.

Accepted Answer

A)  50,000;500,000 to 1 million 
B)  25,000;250,000 to 1 million 
C)  175,000;400,000 to 1 million 
D)  10,000;750,000 
E)  5,000;2 million 
A)  50,000;500,000 to 1 million 
B)  25,000;250,000 to 1 million 
C)  175,000;400,000 to 1 million 
D)  10,000;750,000 
E)  5,000;2 million

Question 6

A mutual fund had NAV per share of $16.75 on January 1,2009.On December 31 of the same year the fund's rate of return for the year was 26.6%.Income distributions were $1.79 and the fund had capital gain distributions of $2.80.Without considering taxes and transactions costs,what ending NAV would you calculate?

Accepted Answer

A)  $17.44 
B)  $13.28 
C)  $14.96 
D)  $17.25 
E)  $16.62 
A)  $17.44 
B)  $13.28 
C)  $14.96 
D)  $17.25 
E)  $16.62

Question 7

The objectives of personal trusts normally are __________ in scope than those of individual investors and personal trust managers typically are __________ than individual investors.

Accepted Answer

A)  broader,more risk averse 
B)  broader,less risk averse 
C)  more limited,more risk averse 
D)  more limited,less risk averse 
E)  none of these 
A)  broader,more risk averse 
B)  broader,less risk averse 
C)  more limited,more risk averse 
D)  more limited,less risk averse 
E)  none of these

Question 8

Hedge funds typically ______ relative mispricing of specific securities and ______ broad market exposure.

Accepted Answer

A)  bet on;bet on 
B)  hedge;hedge 
C)  hedge;bet on 
D)  bet on;hedge 
E)  none of these 
A)  bet on;bet on 
B)  hedge;hedge 
C)  hedge;bet on 
D)  bet on;hedge 
E)  none of these

Question 9

The Profitability Fund had NAV per share of $17.50 on January 1,2001.On December 31 of the same year the fund's NAV was $19.47.Income distributions were $0.75 and the fund had capital gain distributions of $1.00.Without considering taxes and transactions costs,what rate of return did an investor receive on the Profitability fund last year?

Accepted Answer

A)  11.26% 
B)  15.54% 
C)  16.97% 
D)  21.26% 
E)  9.83% 
A)  11.26% 
B)  15.54% 
C)  16.97% 
D)  21.26% 
E)  9.83%

Question 10

Which one of the following is not an objective of a stock mutual fund?

Accepted Answer

A)  Maximization of capital gains. 
B)  Growth. 
C)  Growth and income. 
D)  Income and security. 
E)  None of these. 
A)  Maximization of capital gains. 
B)  Growth. 
C)  Growth and income. 
D)  Income and security. 
E)  None of these.

Question 11

Assume newly issued 30-year-on-the-run bonds sell at higher yields (lower prices)than 29 ½ year bonds with a nearly identical duration.A hedge fund that buys 29 ½ year bonds and sells 30 year bonds is taking a _____.

Accepted Answer

A)  market neutral position 
B)  conservative position 
C)  bullish position 
D)  bearish position 
E)  none of these 
A)  market neutral position 
B)  conservative position 
C)  bullish position 
D)  bearish position 
E)  none of these

Question 12

To a taxpayer in the 34% tax bracket,a tax-free bond available at a price of 100 and a coupon rate of 10% has a taxable equivalent yield of _________.

Accepted Answer

A)  6.6% 
B)  10.0% 
C)  13.4% 
D)  15.2% 
E)  none of these 
A)  6.6% 
B)  10.0% 
C)  13.4% 
D)  15.2% 
E)  none of these

Question 13

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)  convergence 
A)  market neutral 
B)  directional 
C)  relative value 
D)  divergence 
E)  convergence

Question 14

At issue,offering prices of open-end funds will often be

Accepted Answer

A)  less than NAV due to loads and commissions. 
B)  greater than NAV due to loads and commissions. 
C)  less than NAV due to limited demand. 
D)  greater than NAV due to excess demand. 
E)  less than or greater than NAV with no apparent pattern. 
A)  less than NAV due to loads and commissions. 
B)  greater than NAV due to loads and commissions. 
C)  less than NAV due to limited demand. 
D)  greater than NAV due to excess demand. 
E)  less than or greater than NAV with no apparent pattern.

Question 15

Performance evaluation of hedge funds is complicated by _____.

Accepted Answer

A)  liquidity premiums 
B)  survivorship bias 
C)  unreliable market valuations of infrequently traded assets 
D)  unstable risk attributes 
E)  all of these 
A)  liquidity premiums 
B)  survivorship bias 
C)  unreliable market valuations of infrequently traded assets 
D)  unstable risk attributes 
E)  all of these

Question 16

Discuss the consistency of mutual fund performance results,as studied by Goetzmann and Ibbotson (1994)and Malkiel (1995).

Accepted Answer

Goetzmann and Ibbotson found that,of mut

Question 17

A mutual fund had average daily assets of $2.0 billion in 2003.The fund sold $500 million worth of stock and purchased $700 million worth of stock during the year.The funds turnover ratio is

Accepted Answer

A)  27.5%. 
B)  12%. 
C)  15%. 
D)  25%. 
E)  20%. 
A)  27.5%. 
B)  12%. 
C)  15%. 
D)  25%. 
E)  20%.

Question 18

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 
A)  benchmark 
B)  water stain 
C)  water mark 
D)  high water mark 
E)  low water mark

Question 19

Which of the following is true regarding equity mutual funds:
I.They invest primarily in stock.
II.They may hold fixed-income securities as well as stock.
III.Most hold money market securities as well as stock.
IV.Two types of equity funds are income funds and growth funds.

Accepted Answer

A)  I and IV 
B)  I,III,and IV 
C)  I,II,and IV 
D)  I,II,and III 
E)  I,II,III,and IV 
A)  I and IV 
B)  I,III,and IV 
C)  I,II,and IV 
D)  I,II,and III 
E)  I,II,III,and IV

Question 20

When a company sets up a defined contribution pension plan,the __________ bears all the risk and the __________ receives all the return from the plan's assets.

Accepted Answer

A)  employee,employee 
B)  employee,employer 
C)  employer,employee 
D)  employer,employer 
E)  cannot tell;depends on the economic environment. 
A)  employee,employee 
B)  employee,employer 
C)  employer,employee 
D)  employer,employer 
E)  cannot tell;depends on the economic environment.

Exam 22: Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

Hedge funds ______ engage in market timing ______ take extensive derivative positions.

Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000.If Diversified's NAV was $42.13,how many shares must have been held in the fund?

Unlike mutual funds,hedge funds

Shares in hedge funds are priced

The minimum investment in some new hedge funds is as low as $______,compared to a traditional minimum of $______.

The objectives of personal trusts normally are __________ in scope than those of individual investors and personal trust managers typically are __________ than individual investors.

Hedge funds typically ______ relative mispricing of specific securities and ______ broad market exposure.

Which one of the following is not an objective of a stock mutual fund?

Assume newly issued 30-year-on-the-run bonds sell at higher yields (lower prices)than 29 ½ year bonds with a nearly identical duration.A hedge fund that buys 29 ½ year bonds and sells 30 year bonds is taking a _____.

To a taxpayer in the 34% tax bracket,a tax-free bond available at a price of 100 and a coupon rate of 10% has a taxable equivalent yield of _________.

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

At issue,offering prices of open-end funds will often be

Performance evaluation of hedge funds is complicated by _____.

Discuss the consistency of mutual fund performance results,as studied by Goetzmann and Ibbotson (1994)and Malkiel (1995).

A mutual fund had average daily assets of $2.0 billion in 2003.The fund sold $500 million worth of stock and purchased $700 million worth of stock during the year.The funds turnover ratio is

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

Which of the following is true regarding equity mutual funds: I.They invest primarily in stock. II.They may hold fixed-income securities as well as stock. III.Most hold money market securities as well as stock. IV.Two types of equity funds are income funds and growth funds.

When a company sets up a defined contribution pension plan,the __________ bears all the risk and the __________ receives all the return from the plan's assets.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

International Finance and Investments: Understanding Foreign Markets and Risks

Filters

Hedge funds engage in market timing take extensive derivative positions.

The minimum investment in some new hedge funds is as low as $,compared to a traditional minimum of $.

The objectives of personal trusts normally are in scope than those of individual investors and personal trust managers typically are than individual investors.

Hedge funds typically relative mispricing of specific securities and broad market exposure.

When a company sets up a defined contribution pension plan,the bears all the risk and the receives all the return from the plan's assets.