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AWMA Questions with 100% Actual correct answers
AWMA Questions with 100% Actual correct answers
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AWMACapital Market Line - ANS-A graphical representation of the relationship between risk
and return, where risk is measured by standard deviation; the CML includes the concept
of a risk-free rate of return
Jenson Performance index - ANS-Used in comparing performance money managers on
a risk-adjusted basis and can be used by itself. A number above 0.00 indicates the
manager had better performance than would be expected given the risk he took... vice
versa
How are Treynor and Sharpe indexes best used? - ANS-Both are used to compare the
risk - adjusted returns on diff funds. The higher the risk-adjusted return, the better. The
key diff is that Treynor uses Beta as its risk measure, so Treynor can only be used with
fully diversified portfolios. Sharpe, uses Standard deviation (total risk) as its measure of
risk so can only be used with either fully diversified or nondiversified portfolios
Benefits of Buy and hold - ANS-returns at least as good as strategies based on
technical analysis, low transactional costs, the deferral of capital gains taxes on profits,
not missing the best days of the market
Property' value - ANS-NOI/Cap Rate
Typical hedge fund fees - ANS-annual management fee (typically around 2%), most
have incentive (performance) fee between 10 and 20% of the funds profits. The term "2
and 20" would refer to a 2% management fee and 20% profits going to hedge fund
manager. there can be a hurdle rate that the fund manager must surpass in order to
earn a performance fee. also can be a surrender fee when the fund is sold.
Major risk in hedge funds - ANS-illiquidity, manager risk, investment strategy risk,
headline/regulatory risk, and the risk that there may be adverse tax consequences
Market directional - ANS-includes equity long/short, short-selling, and activist
corporate restructuring - ANS-includes distressed securities, merger arbitrage, event
driven, and regulation D offerings
convergence trading - ANS-includes fixed-income arbitrage, convertible bond arbitrage,
equity market-neutral, and relative value arbitrage
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