CAIA Exam Free Practice Questions & Answers Set Two

What would form when an investor could assemble a portfolio that delivered exactly the cash flows they desired on any possible date?

If there is an outcome of the economy that specifies the realized values of all economically significant variables, which choice perfectly describes it?

An investor in a 40% tax bracket earns an after-tax return of 9%. What must be the investor’s pre-tax return?

Consider an investor at a current 35 percent tax rate that anticipates a 20 percent reduced tax rate in 10 years (after retirement). If the investor puts money in a wrapper offering tax deduction and tax deferment, what will be the after-tax rate of the investor’s annual return if the pre-tax rate is 6 percent and the time horizon is 10 years?

Which of the following is a private equity firm, which often serves as the general partners of private equity funds, usually invests its own capital and sometimes owns the underlying undertakings fully?

Which of the following are the non-listed, typically small businesses that seek to grow through investments from private equity funds or private equity firms?

Why there is mezzanine debt referred to as mezzanine?

How investors can protect themselves from losses that exceed their investment?

What do we call it if the portion of the incentive fees for managers is held in a separate account until the entire fund is liquidated?

What is the absolute priority rule?

When two or more LBO companies collaborate in cost-sharing, present a business plan, and contribute capital?

Harry is a Hedge fund investor. In which of the following he should invest?

TTMAR Hedge Fund has a fee arrangement of 1.5 and 30 at the start of the year, with no hurdle rate and a NAV of $200 million. The NAV is $253 million at year-end, before fees. Assuming management fees are calculated and distributed annually on start-of-year NAVs, find the annual management fee and the incentive fee.

Person X is a manager that earns a portion of investment gains without compensating investors for investment losses. Which category does he fall into?

Consider a $1 billion hedge fund at the beginning of a new incentive fee calculation period with a 20 percent incentive fee. If the hedge fund calculates incentive fees annually and starts the year very close to its high-water mark, what would be the value of the 10% annual asset volatility incentive fee over the next year, 20%, and 30% using the approximation formula for the at-the-money incentive fee?

Market neutrality is also known as mean neutral but when mean neutral occurs?

What are primary purposes of funds of funds?

Which of the following is an agreement with a major bank to provide temporary cash for specified needs with pre-specified conditions?

Why Do Not Exercise Certain In-the-Money Options Immediately?

Consider a permanent right with an inherent present value of $100. The owner of the option assumes that potential increases in the option’s moneyness are unpredictable and are symmetric for simplicity. If the moneyness falls to $200, what is the intrinsic value of the option?

According to the PVGO valuation theory, which of the following on corporate finance is correct?

Which real estate derives most or all of its returns from the appreciation of the property, and can show significant volatility in value and returns?

Mortgage A has a PSA rate of 200 percent per month and is now five years old. What is CPR? If the PSA standard is 6 percent at 30 months.

How can we avoid specifying a precise relationship between unschedule prepayments and interest rates?

Which of the following is a pool of investment capital raised from private placements mixed together to buy commercial properties?

Which represent more direct consumer claims than common stocks, with less dependence on factors such as intangible assets and management skills that generate value in a company?

Performance of which is significantly impacted by the skill and effectiveness of routine and relatively frequent managerial decision making?

How can we understand an investment strategy, particularly using a statistical approach , based on its investment strategies or styles?

An analysis of a 50-week rolling window with exactly four years Data (208 weeks).How many independent statistical analyzes would there be?

Which of the following is the distinguishing characteristic used by marketwide return factors in the multifactor analysis?