22 Free CFA Level 2 Mock Exam Questions and Answers on Alternative Investments

If you’re considering the CFA qualification, it’s important to fully clue up on all the requirements now. One of the tough challenges is passing all three levels of the exam and you need to have an effective study plan to be able to achieve the success as you expected. 22 Free CFA Level 2 Mock Exam Questions and Answers on Alternative Investments will be a powerful tool to help you improve your performance when the exam is coming. Various CFA practice questions for free showcased in the multiple choice format will make your testing process smoother and easy to check out the results by instant answers at the end of this test. Visit our page to find out more the CFA exams and go over CFA practice mock exams. Hope you get high scores! If have any questions, let us know in the comments below!

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- distressed debt (long and short in different securities of issuer)

• Arbitrage based HF strategy
• Risk arbitrage HF strategy
• Event driven HF strategy
• Directional HF strategy

PRE + INV = POST

• LBO Model has three main inputs
• RVPI (residual value to paid-in capital)
• Post-money valuation of the firm in a PE deal is
• Medium volatility HF strategy

- quant strategy

• Arbitrage based HF strategy
• Event driven HF strategy
• Managed futures HF strategy
• long-short equity HF strategy

- matches long and short positions; make money slowly- short volatility- lowest STD and highest sharpe ratio

• Directional HF strategy
• Event driven HF strategy
• Risk arbitrage HF strategy
• Arbitrage based HF strategy

- makes active beds, no hedging

• Event driven HF strategy
• Directional HF strategy
• Arbitrage based HF strategy
• Risk arbitrage HF strategy

measures the LP's realized return and is the cumulative distributions paid to the LP's divided by the cumulative invested capital

• DPI (distributed to paid-in capital)
• Private equity exit value
• RVPI (residual value to paid-in capital)
• LBO Model has three main inputs

- quant models- zero beta exposure, exposure to other market factors

• Directional HF strategy
• Equity market neutral HF strategy
• Risk arbitrage HF strategy
• Event driven HF strategy

- not normally or linearly- usually negative skewness and high kurtosis (fat tails)

• Hedge fund performance reporting suffers from
• Hedge fund returns are distributed how
• Event driven HF strategy
• Managed futures HF strategy

1 option: carried interest paid only after the entire committed capital is returned2: carried interest paid only when the value of the portfolio exceeds invested capital by some minimum amount

• Total return method (type of distribution waterfall)
• Hedge fund returns are distributed how
• Build-up method for valuing RE
• DPI (distributed to paid-in capital)

- Measures the LP's unrealized return is the value of the the LP's holding in the fund divided by the cumulative invested capital- TVPI (both DPI and RVPI) is net of fees

• RVPI (residual value to paid-in capital)
• DPI (distributed to paid-in capital)
• Capitalization rate
• LBO Model has three main inputs

- uses a WACC as an estimate of the market capitalization rate- adds a sinking fund factor to the debt cost

• Event driven HF strategy
• Managed futures HF strategy
• Capitalization rate
• Band of Investment Method (BOI)

- long lower credit quality and short higher quality

• Convertible bond arbitrage HF strategy
• Medium volatility HF strategy
• Fixed income arbitrage HF strategy
• Risk arbitrage HF strategy

Exit value = investment cost + earnings growth + increase in price multiple + reduction in debt

• Capitalization rate
• Private equity exit value
• long-short equity HF strategy
• Risk arbitrage HF strategy

- increased volatility, but still below underlying market due to both long and short positions

• Risk arbitrage HF strategy
• Event driven HF strategy
• Medium volatility HF strategy
• Directional HF strategy

Pure interst rate + liquidity premium + recapture premium + risk premium

• Private equity exit value
• Capitalization rate
• Build-up method for valuing RE
• LBO Model has three main inputs

- selection bias (self-reporting bias)- backfill bias (they improve their historical performance once they reported it)- survivorship bias

• Event driven HF strategy
• LBO Model has three main inputs
• Hedge fund returns are distributed how
• Hedge fund performance reporting suffers from

- long convertible bond, short equity- long volatility and long credit spreads (when they tighten, bond values increase)

• Event driven HF strategy
• Fixed income arbitrage HF strategy
• Convertible bond arbitrage HF strategy
• Risk arbitrage HF strategy

- merger arbitrage

• Directional HF strategy
• Fixed income arbitrage HF strategy
• Risk arbitrage HF strategy
• Arbitrage based HF strategy

= r-g when evaluating RE- in times of inflation, g increases, thus market values increase

• Directional HF strategy
• Arbitrage based HF strategy
• Capitalization rate
• Event driven HF strategy

- work percent ownership backwards, then # of shares to each forward

• Hedge fund performance reporting suffers from
• In working the multi-round financing / share problem
• Convertible bond arbitrage HF strategy
• Build-up method for valuing RE

1. target's forecasted returns2. expected returns to the providers of the financing3. total amount of financing

• LBO Model has three main inputs
• Managed futures HF strategy
• Arbitrage based HF strategy
• Private equity exit value

- market neutral, but not necessarily a zero beta- can adjust beta for when market moves

• long-short equity HF strategy
• Medium volatility HF strategy
• Event driven HF strategy
• Managed futures HF strategy