FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 20: Hedge Funds

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

You manage a hedge fund with $400 million in assets. Your fee structure provides for a 1% annual management fee with a 20% incentive on returns over an 8% benchmark. If the fund value is $445 million at the end of the year, what is your fee?

A) $2,600,000
B) $4,000,000
C) $6,600,000
D) $8,400,000

E) A) and C)
F) A) and D)

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following are not managed investment companies?

A) hedge funds
B) unit investment trusts
C) closed-end funds
D) open-end funds

E) A) and B)
F) B) and C)

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

A typical traditional initial investment in a hedge fund generally is in the range between ________ and ________.

What strategy might a hedge fund use to take advantage of positive alpha in a long equity position?

Which of the following typically employ(s) significant amounts of leverage? I. Hedge funds II. Equity mutual funds III. Money market funds IV. Income mutual funds

A 1-year oil futures contract is selling for $74.50. Spot oil prices are $68, and the 1-year risk-free rate is 3.25%. The arbitrage profit implied by these prices is ________.

A restriction under which investors cannot withdraw their funds for as long as several months or years is called ________.

A ________ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.

A hedge fund owns a $15 million bond portfolio with a modified duration of 11 years and needs to hedge risk, but T-bond futures are available only with a modified duration of the deliverable instrument of 10 years. The futures are priced at $105,000. The proper hedge ratio to use is ________.

The collapse of the Long Term Capital Management hedge fund in 1998 was a case of an extremely unlikely statistical event called ________.

Hedge fund managers receive incentive bonuses when they increase portfolio assets beyond a stipulated benchmark but lose nothing when they fail to perform. This is equivalent to ________.

A hedge fund has $150 million in assets at the beginning of the year and 10 million shares outstanding throughout the year. Throughout the year assets grow at 12%. The fund charges a 3% management fee on the assets. The fee is imposed on year-end asset values. What is the end-of-year NAV for the fund?

Which of the following investment styles could be the best description of the Long Term Capital Management market-neutral strategies?

You manage a hedge fund with $300 million in assets. Your fee structure provides for a 1% annual management fee with a 20% incentive on returns over a 12% benchmark. If the fund value, before fees, is $345 million at the end of the year, what is the net return to the investors?

A market neutral hedge fund is likely to have ________.

Research by Aragon (2007) indicates that lock-up restrictions tend to hold ________ portfolios.

Assume the risk-free interest rate is 10% and is equal to the fund's benchmark, the portfolio's net asset value is $100, and the fund's standard deviation is 20%. Also assume a time horizon of 1 year. Assuming a 2% management fee and a 20% incentive bonus, what is the expected management compensation per share if the fund's net asset value exceeds the stated benchmark?

Portfolio A has a beta of .2 and an expected return of 14%. Portfolio B has a beta of .5 and an expected return of 16%. The risk-free rate of return is 10%. If you manage a long-short equity fund and want to take advantage of an arbitrage opportunity, you should take a short position in portfolio ________ and a long position in portfolio ________.

Higher returns of equity hedge funds as compared to the S&P 500 Index reflect positive compensation for ________ risk.

You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250. How much is the portfolio expected to be worth 3 months from now?