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| 1 | |
Unlike mutual funds, hedge funds |
| | 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. |
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| 2 | |
The risk profile of hedge funds ______, making performance evaluation ______. |
| | A) | can shift rapidly and substantially; challenging |
| | B) | can shift rapidly and substantially; straightforward |
| | C) | is stable; challenging |
| | D) | is stable; straightforward |
| | E) | none of the above |
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| 3 | |
Hedge funds are typically set up as ______ and provide ______ information about portfolio composition and strategy to their investors. |
| | A) | limited liability partnerships; minimal |
| | B) | limited liability partnerships; extensive |
| | C) | investment trusts; minimal |
| | D) | investment trusts; extensive |
| | E) | none of the above |
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| 4 | |
Hedge funds are ______ transparent than mutual funds because of ______ strict SEC regulation on hedge funds. |
| | A) | more; more |
| | B) | more; less |
| | C) | less; less |
| | D) | less; more |
| | E) | none of the above |
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| 5 | |
The minimum investment in some new hedge funds is as low as ______, compared to a traditional minimum of ______. |
| | A) | $50,000; $500,000 to $1million |
| | 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 |
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| 6 | |
Hedge funds may invest or engage in |
| | A) | distressed firms. |
| | B) | convertible bonds. |
| | C) | currency speculation. |
| | D) | merger arbitrage. |
| | E) | all of the above |
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| 7 | |
A hedge fund pursuing a ______ strategy is attempting to exploit temporary misalignments in relative pricing. |
| | A) | directional |
| | B) | nondirectional |
| | C) | stock or bond |
| | D) | arbitrage or speculation |
| | E) | none of the above |
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| 8 | |
A hedge fund attempting to profit from a change in the spread between mortgages and Treasuries is using a ______ strategy. |
| | A) | market neutral |
| | B) | directional |
| | C) | relative value |
| | D) | divergence |
| | E) | convergence |
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| 9 | |
The previous value of a portfolio that must be reattained before a hedge fund can charge incentive fees is known as a ______. |
| | A) | benchmark |
| | B) | water stain |
| | C) | water mark |
| | D) | high water mark |
| | E) | low water mark |
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| 10 | |
Hedge funds exhibit a pattern known as a |
| | A) | January effect |
| | B) | Santa effect |
| | C) | size effect |
| | D) | book-to-market |
| | E) | none of the above |
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