Quiz 1

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Everest College *

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FIN3501

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Finance

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Feb 20, 2024

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Alternative Investments - Quiz 1 Question 1 Marks: 1 When using the net income approach (NOI) in real estate valuation, if inflation is passed through, then the appraisal price will most likely: Choose one answer. a. increase. b. remain unchanged. c. decrease. Question 2 Marks: 1 An analyst collects the following data: Apartment Complex Under Consideration Apartment Complex Recently Sold Office Building Recently Sold Net Operating Income (NOI) $250,000 $91,000 $480,000 Sales price $700,000 $3,000,000

Based on the data provided, the appraisal price of the apartment complex under consideration is closest to: Choose one answer. a. $1,562,500. b. $1,923,077. c. $1,724,138. Question 3 Marks: 1 Hedge funds that contain infrequently traded assets would most likely exhibit a downward bias with respect to: Choose one answer. a. correlations with conventional equity investments but not measured risk. b. measured risk but not correlations with conventional equity investments. c. both measured risk and correlations with conventional equity investments. Question 4 Marks: 1 Venture capital investments used to provide capital for companies initiating commercial manufacturing and sales are most likely to be considered a form of: Choose one answer. a. first-stage financing. b. second-stage financing. c. seed-stage financing. Question 5 Marks: 1 Which classification of hedge funds is least likely to use a short position in stock as a part of its strategy? Choose one answer. a. Market-neutral funds. b. Distressed securities funds. c. Emerging-market funds. Question 6

Marks: 1 The infrequent trading of some assets that hedge funds invest in most likely results in hedge fund: Choose one answer. a. returns being understated. b. correlations with other assets being overstated. c. risk being understated. Question 7 Marks: 1 Which of the following is the least accurate approach used to value closely held companies? Basing the value of company on the: Choose one answer. a. historic cost of the assets of similar companies. b. present value of future economic income. c. average market price of similar companies recently sold. Question 8 Marks: 1 The primary motivation for investing in commodity-linked bonds is that they most likely provide: Choose one answer. a. Protection against interest rate risk. b. Capital gains returns. c. An income stream. Question 9 Marks: 1 An analyst compared the performance of a hedge fund index with the performance of a major stock index over the past eight years. She noted that the hedge fund index (created from a database) had a higher average return, higher standard deviation, and higher Sharpe ratio than the stock index. All the successful funds that have been in the hedge fund database continued to accept new money over the eight-year period. What biases do the risk and return measures in the database most likely have? Average return: Choose one answer. a. is understated and standard deviation is overstated.

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b. and standard deviation are both overstated. c. is overstated and standard deviation is understated. Question 10 Marks: 1 A variation of which real estate valuation approach is most likely to use slope coefficients derived from a statistical analysis to estimate the value of a property? Choose one answer. a. Income approach. b. Cost approach. c. Sales comparison approach. Question 11 Marks: 1 Hedge funds that contain infrequently traded assets would most likely exhibit a downward bias with respect to: Choose one answer. a. measured risk but not correlations with conventional equity investments. b. correlations with conventional equity investments but not measured risk. c. both measured risk and correlations with conventional equity investments. Question 12 Marks: 1 A typical hedge fund fee structure is least likely to include a: Choose one answer. a. base fee. b. high water mark. c. negative incentive fee. Question 13 Marks: 1 A fund manager is compensated with a base management fee plus an incentive fee proportional to the fund’s return above a benchmark. This best describes the fee structure of: Choose one answer.

a. an exchange traded fund. b. a mutual fund. c. a hedge fund. Question 14 Marks: 1 The real estate valuation approach that uses a perpetuity discount type model is the: Choose one answer. a. sales comparison approach. b. income approach. c. cost approach. Question 15 Marks: 1 Capital provided for companies beginning operation but before commercial manufacturing and sales have occurred best describes which stage in venture capital investing? Choose one answer. a. Seed-stage b. Later-stage c. Early-stage Question 16 Marks: 1 A managed futures fund would most likely be categorized as: Choose one answer. a. Macroeconomic hedge fund. b. Global hedge fund. c. Sector style fund. Question 17 Marks: 1 Which of the following is least likely to distort the historical performance of a Hedge Fund index? Choose one answer.

a. Tracking error bias b. Backfilling bias c. Self-selection bias Question 18 Marks: 1 Hedge funds that contain infrequently traded assets would most likely exhibit a downward bias with respect to: Choose one answer. a. Correlations with conventional equity investments but not measured risk. b. Measured risk but not correlations with conventional equity investments. c. Both measured risk and correlations with conventional equity investments. Question 19 Marks: 1 An investor would most likely expect commodities to have; Choose one answer. a. positive correlations with traditional stock or bond Investments and Inflation. b. positive correlations with traditional stock or bond Investments and negative correlation with Inflation. c. negative correlations with traditional stock or bond Investments and positive correlation with Inflation. Question 20 Marks: 1 An investor taking a long position in commodity futures while simultaneously investing in government securities has created a: Choose one answer. a. Commodity-linked equity b. Collateralized commodity futures position c. Commodity-linked bond

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