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AWMA TEST QUESTIONS AND ANSWERS
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AWMA TEST QUESTIONS AND ANSWERSCapital Market Line - ANSWER. A graphical representation of the relationship
between risk and return, where risk is measured by standard deviation; the CML
incorporates the concept of a risk-free rate of return.
Jenson Performance Index - ANSWER utilized to compare the performance of
money managers on a risk-adjusted basis and can be utilized independently. A
score over 0.00 implies that the management performed better than predicted
considering the risk he took... vice versa.
How do Treynor and Sharpe's indexes work best? - ANSWER Both are used to
compare risk-adjusted returns across different funds. The greater the risk-adjusted
return, the better. The main difference is that Treynor employs Beta as a risk
metric, hence it can only be utilized with fully diversified portfolios. Sharpe
employs standard deviation (total risk) as a measure of risk and can only be used
with fully diversified or nondiversified portfolios.
Benefits of Buy and Hold: ANSWER returns at least as good as techniques based
on technical analysis, minimal transactional costs, the deferral of capital gains taxes
on profits, and not missing the finest days of the market.
Property value - ANSWER NOI/Cap Rate
Typical hedge fund fees include an annual management charge of roughly 2%, as
well as an incentive (performance) fee of 10 to 20% of the fund's profits. The
expression "2 and 20" refers to the hedge fund manager receiving a 2%
management fee and 20% of the earnings. To earn a performance fee, the fund
management may need to exceed a certain threshold. There may also be a surrender
fee when the fund is sold.
Major risks in hedge funds include illiquidity, management risk, investment
strategy risk, headline/regulatory risk, and the potential of negative tax
repercussions.
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