Deck 20: Professional Money Management, Alternative Assets and Industry Ethics

Question 1

Funds that attempt to provide current income, safety of principal and liquidity are known as

A) balanced funds.
B) flexible funds.
C) income funds.
D) money market funds.
E) index funds.

Answer 1

D

Question 2

The gross return of closed-end investments companies has typically been

A) 10-20 per cent less than their NAV.
B) 10-15 per cent less than their NAV.
C) less than the net return.
D) about the same as the net return.
E) none of the above

Answer 2

E

Question 3

Net asset value (NAV) is determined by

A) the total market value of all its assets divided by the number of fund shares outstanding.
B) the total market value of all its assets multiplied by the number of fund shares outstanding.
C) the total market value of all its assets divided by the number of shareholders.
D) supply and demand for the investment company stock in the secondary market.
E) supply and demand for the investment company stock in the primary market.

Answer 3

A

Question 4

Which of the following are functions that a portfolio manager should perform for clients?

A) Determine investment objectives and constraints, diversify the portfolio and eliminate tax payments.
B) Determine investment objectives, diversify the portfolio, maintain ethical standards and eliminate tax payments.
C) Determine investment objectives and constraints, diversify the portfolio and maintain ethical standards.
D) Determine investment constraints, maintain ethical standards and eliminate tax payments.
E) Determine investment objectives and constraints, diversify the portfolio, eliminate tax payments and achieve risk adjusted return superior to the relevant benchmark.

Question 5

In a long short-short hedge fund strategy

A) managers take long positions in undervalued stocks and short positions in overvalued stocks.
B) managers take short positions in undervalued stocks and long positions in overvalued stocks.
C) managers take offsetting risk positions on the long and short side.
D) all of the above.
E) none of the above.

Question 6

A major question in modern finance regarding closed-end investment companies is

A) why do these funds sell at discounts?
B) why do the discounts differ between funds?
C) what are the returns available to investors from funds that sell at a large discount?
D) choices a and b only
E) all of the above

Question 7

When the offer price and the NAV of a mutual fund are equal it is an indication that

A) the fund's assets are in equilibrium.
B) the fund is trading at par.
C) it is strictly a coincidence.
D) the fund has no initial fee.
E) the fund is backloaded.

Question 8

Investing in emerging markets can be viewed as a global application of

A) fixed-income arbitrage.
B) convertible arbitrage.
C) merger arbitrage.
D) distressed opportunistic strategies.
E) equity market neutral.

Question 9

A mutual fund typically performs all of the following functions, except

A) provides alternative risk-return options.
B) eliminates unsystematic risk.
C) provides diversification.
D) derives a risk-adjusted performance that is consistently superior to risk-adjusted net return of the aggregate market.
E) administers the account, keeps records and provides timely information.

Question 10

In the case of open-end investment companies, shares of the company

A) trade on the secondary market.
B) can be bought from or sold to the investment company at the NAV.
C) are determined by supply and demand.
D) a and c.
E) b and c.

Question 11

The closed-end fund index is

A) value weighted and based on market values.
B) value weighted and based on NAVs.
C) price weighted and based on market values.
D) price weighted and based on NAVs.
E) equally weighted and based on market values.

Question 12

Which of the following is not an example of an alternative asset class?

A) Hedge funds
B) Private equity
C) Real estate
D) Commodities
E) All of the above are examples of alternative asset classes.

Question 13

An investment vehicle that acts like a mutual fund of hedge funds, and allows investors access to managers that might otherwise be unavailable is known as

A) managed futures funds.
B) long-short equity funds.
C) fund of funds.
D) private equity funds.
E) leveraged buyouts (LBOs).

Question 14

What type of funds are typically no-load funds that impose no penalty for early withdrawal and generally allow holders to write cheques against their account?

A) Mutual funds
B) Open-end funds
C) Closed-end funds
D) Money market funds
E) Balanced funds

Question 15

An open-end investment company is commonly referred to as a(n)

A) balanced fund.
B) mutual fund.
C) money market fund.
D) accessible fund.
E) unit trust.