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CAIA ALTS (MODULE #2) EXAM QUESTIONS WITH COMPLETE ANSWERS
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CAIA ALTS (MODULE #2) EXAM QUESTIONS WITH COMPLETE ANSWERS
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CAIA EXAM 1 CHAPTER #1 QUESTIONSWITH COMPLETE ANSWERS
Alternative investments - Answer-Alternative investments are sometimes viewed as
including any investment that is not simply a long position in traditional investments.
Fixed-Income Securities - Answer-A fixed income security is an investment that
provides a return in the form of fixed periodic payments and the eventual return of
principal at maturity.
Private equity - Answer-Private equity is capital that is not listed on a public exchange.
Private equity is composed of funds and investors that directly invest in private
companies, or that engage in buyouts of public companies, resulting in the delisting of
public equity. Institutional and retail investors provide the capital for private equity, and
the capital can be utilized to fund new technology, make acquisitions, expand working
capital, and to bolster and solidify a balance sheet.
Private Debt - Answer-Private debt is the debt accumulated by individuals or private
businesses. Private debt can take numerous forms; a personal loan, credit card,
corporate bond or business loan for instance.
Traditional Investments - Answer-Typically, traditional investments include publicly
traded equities, fixed-income securities, and cash. For example, if a particular
investment (such as private equity) is not commonly covered as equity in books on
investing, then many people would view it as an alternative investment.
Deferred Consumption - Answer-Saving is income not spent, or deferred consumption.
Investment - Answer-A good definition of an investment is that it is deferred
consumption. Any net outlay of cash made with the prospect of receiving future benefits
might be considered an investment. So investments can range from planting a tree to
buying stocks to acquiring a college education.
Institutional Quality Investment - Answer-is the type of investment that financial
institutions such as pension funds or endowments might include in their holdings
because they are expected to deliver reasonable returns at an acceptable level of risk.
For example, a pension fund would consider holding the publicly traded equities of a
major corporation but may be reluctant to hold collectibles such as baseball cards or
stamps.
Also, investments in very small and very speculative projects are typically viewed as
being inappropriate for such an institution due to its responsibility to select investments
that offer suitable risk levels and financial return prospects for its clients.
Major Alternative Asset Catagories - Answer-38% hedge funds
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