Question 1

Assume that you have invested $500,000 to purchase shares in a hedge fund reporting $800 million in assets, $100 million in liabilities, and 70 million shares outstanding. Your initial lockout period is 3 years.
What is your annualized return over the 3-year holding period?

Accepted Answer

A)   14.45%
B)   15.18%
C)   16%
D)   17.73%E) A) and D)
F) B) and C)

Question 2

Assuming positive basis and negligible borrowing cost, which of the following transactions could yield positive arbitrage profits if pursued by a hedge fund?

Accepted Answer

A)   Buy gold in the spot market, and sell the futures contract.
B)   Buy the futures contract, and sell the gold spot and invest the money earned.
C)   Buy gold spot with borrowed money, and buy the futures contract.
D)   Buy the futures contract, and buy the gold spot using borrowed money.E) A) and B)
F) A) and C)

Question 3

Unlike market-neutral hedge funds, which have betas near ________, directional long funds exhibit highly ________ betas.

Accepted Answer

A)   zero; positive
B)   positive; negative
C)   positive; zero
D)   negative; positiveE) B) and C)
F) All of the above

Question 4

Malkiel and Saha (2005)  estimate that the survivorship bias for hedge funds equals 4.4%, which is ________ the survivorship bias for mutual funds.

Accepted Answer

A)   about the same as
B)   much lower than
C)   much higher than
D)   only slightly lower thanE) A) and B)
F) A) and C)

Question 5

______ are private partnerships of a small number of wealthy investors, are often subject to lock-up periods, and are allowed to pursue a wide range of investment activities.

Accepted Answer

A)   Hedge funds
B)   Closed-end funds
C)   REITs
D)   Mutual fundsE) C) and D)
F) A) and C)

Exam 20: Hedge Funds

______ are private partnerships of a small number of wealthy investors, are often subject to lock-up periods, and are allowed to pursue a wide range of investment activities.

Correct Answer
verified

Assume that you have invested $500,000 to purchase shares in a hedge fund reporting $800 million in assets, $100 million in liabilities, and 70 million shares outstanding. Your initial lockout period is 3 years. What is your annualized return over the 3-year holding period?

Correct Answer
verified

Assuming positive basis and negligible borrowing cost, which of the following transactions could yield positive arbitrage profits if pursued by a hedge fund?

Correct Answer
verified

Malkiel and Saha (2005) estimate that the survivorship bias for hedge funds equals 4.4%, which is ________ the survivorship bias for mutual funds.

Correct Answer
verified

Unlike market-neutral hedge funds, which have betas near , directional long funds exhibit highly betas.

Correct Answer
verified

Exam 20: Hedge Funds

______ are private partnerships of a small number of wealthy investors, are often subject to lock-up periods, and are allowed to pursue a wide range of investment activities.

Correct AnswerverifiedShow Answer

Assume that you have invested $500,000 to purchase shares in a hedge fund reporting $800 million in assets, $100 million in liabilities, and 70 million shares outstanding. Your initial lockout period is 3 years. What is your annualized return over the 3-year holding period?

Correct AnswerverifiedShow Answer

Assuming positive basis and negligible borrowing cost, which of the following transactions could yield positive arbitrage profits if pursued by a hedge fund?

Correct AnswerverifiedShow Answer

Malkiel and Saha (2005) estimate that the survivorship bias for hedge funds equals 4.4%, which is ________ the survivorship bias for mutual funds.

Correct AnswerverifiedShow Answer

Unlike market-neutral hedge funds, which have betas near ________, directional long funds exhibit highly ________ betas.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Unlike market-neutral hedge funds, which have betas near , directional long funds exhibit highly betas.

Correct Answer
verified