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CAIA FUNDAMENTALS QUESTIONS AND ANSWERS
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CAIA FUNDAMENTALS QUESTIONS AND ANSWERS
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CAIA FUNDAMENTALS QUESTIONS AND ANSWERSWhich of the following structures transforms asset ownership into potentially distinct and
diverse tradable investment opportunities? - Answers-trading structure
Which of the following structures refers to the financial markets related to a particular
instrument, such as whether the investment is publicly traded on an exchange? -
Answers-
Which of the following investments most likely has a long lock-up period with a fund life
of ten years or longer?
hedge funds
managed futures
private equity
structured products - Answers-private equity
Which of the following facilitates increasing leverage in an investment fund?
I. Borrowed funds
II. Trading options and futures
III. Investing in mortgage-backed securities
IV. Investing the proceeds from short sales - Answers-I, II, IV
Which two of the following most correctly describe registered funds?
I. Registered funds have greater liquidity than private placements
II. Private placements have greater liquidity than registered funds
III. Registered funds are only available to accredited investors
IV. Registered funds are available to both retail and accredited investors - Answers-I
and IV
Which of the following terms is best defined as returns that are to be evaluated relative
to zero- or relative to the riskless rate - and therefore independently of performance in
equity or debt markets?
absolute return
risk-free return
benchmark return
relative return - Answers-absolute return
Which of the following best describes the risk and return of short sales of equity
securities?
limited gains and potentially unlimited losses
potentially unlimited gains and losses
Limited losses and potentially unlimited gains
Limited losses and gains - Answers-limited gains and potentially unlimited losses
Which of the following best describes benchmarking in the context of investments?
the process of marking a portfolio to its most likely liquidation value
, process of adjusting investment performance for taxation or fees
process of setting and applying a standard for performance
process of calibrating a model to prices observed in liquid markets - Answers-process of
setting and applying a standard for performance
Which of the following refers to the likelihood that the future returns of an investment will
be similar in magnitude and risk to the returns observed in a sample?
skewness
representativeness
heteroskedasticity
autocorrelation - Answers-autocorrelation
Which of the following best describes a normally distributed return distribution?
a distribution in which the right skew is twice the left skew
a distribution with no outliers
the returns form a parabola with probabilities increasing at an increasing rate
returns form a bell-shaped diagram when they are plotted against profitability - Answers-
returns form a bell-shaped diagram when they are plotted against profitability
Which of the following describes the return distribution of an asset with very high
probabilities of very high and very low outcomes?
high mean or asymmetrical
low mean or platykurtic
thin-tailed or mesokurtic
fat-tailed or leptokurtic - Answers-fat-tailed or leptokurtic
Which of the following is the process of identifying and interpreting the components or
determinants of an asset's performane?
quantum analysis
spectrum analysis
return distribution
return attribution - Answers-return attribution
Which of the following best describes the relationship between the return of an asset, a
benchmark return, and active return?
return of an asset (ROA) = benchmark return - active return
ROA = benchmark return / active return
ROA = benchmark return * active return
ROA = benchmark return + active return - Answers-ROA = benchmark return + active
return
Which of the following best describes the benchmark return that is calculated as an
average of the returns from a collection of similar assets?
total unanimity benchmark
adjunct compilation benchmark
similar profile benchmark
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