AWMA Test with Complete Solutions Graded A+
Venture Capital - Answer- most well known type of private equity. Investors are seeking a high rate of return but also taking on very high level of risk. returns are tied to market performance so when the public stock markets are doing well so are inve...
AWMA Test with Complete
Solutions Graded A+
Venture Capital - Answer- most well known type of private equity. Investors are seeking
a high rate of return but also taking on very high level of risk. returns are tied to market
performance so when the public stock markets are doing well so are investors.
Leveraged Buyouts (LBOs) - Answer- to take a company private in order to repackage
and restructure the company and then return the company to the public market at a
higher price through and IPO. Or - to break up the company into several parts and sell
off the diff parts of the business to different bidders (cut and run)
Mezzanine financing - Answer- essentially debt with an equity component. Often found
in the middle market- - companies that are not yet large enough to have ready access to
the capital markets but are larger than venture capital firms
distressed debt - Answer- investing in the debt of companies that are in trouble or
failing. performance is tied to the individual circumstances on the company itself.
potential benefits of adding managed futures to a portfolio - Answer- it can enhance
long-term returns while lowering overall risk. Managed futures have often had a low
correlation with traditional stocks and bonds, making it a good diversifier.
money purchase pension plan - Answer- specifies a fixed percentage of a participants
compensation (25%) that the company will contribute to a pension plan annually,
regardless of company performance. employer contributions cannot exceed 25% of
payroll
profit sharing plan - Answer- the employer may contribute up to 25% of payroll but the
percentage contributed in any given year is discretionary as long as the contributions
are substantial and recurring. Contributions may be decreased in years of poor
performance.. vice versa
Top down analysis - Answer- Attempts to time the broad movements of the economy
typically begin with topdown analysis. This is a forecast of the economy as a whole,
followed by the identification of sectors of the economy (or industries) that should
logically benefit from that forecast and finally, identification of particular firms within the
favored sectors or industries that stand to be market leaders. Most brokerage research
departments provide just this type of analysis to their investment professionals.
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