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AWMA Questions & 100% Correct Answers

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Capital Market Line ~~> 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 ~~> Used in comparing performance money managers on a ri...

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  • September 12, 2024
  • 6
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • AWMA
  • AWMA
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MASTER01
1 | P a g e | © copyright 2024/2025 | Grade A+




AWMA Questions & 100% Correct Answers
Capital Market Line

✓ ~~> 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

✓ ~~> 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?

✓ ~~> 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



Master01 | September, 2024/2025 | Latest update

, 2 | P a g e | © copyright 2024/2025 | Grade A+



✓ ~~> 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

✓ ~~> NOI/Cap Rate




Typical hedge fund fees

✓ ~~> 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

✓ ~~> illiquidity, manager risk, investment strategy risk,

headline/regulatory risk, and the risk that there may be adverse tax

consequences




Market directional




Master01 | September, 2024/2025 | Latest update

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