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

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1 takeover2 MBO management buyouts3 LBO leveraged buyouts

• hedonic index
• Exit routes
• DOWNREIT
• Buyounts types

1 Leverage↑2 regulation↓3 liquidity↓4 biases in index performance5 return distribution not normal: - skewness & high kurtosis6 σ cant be used7 fee↑

• Gross income multiplier
• Hedge Fund strategies
• FFO funds from operations
• Hedge Fund vs Mutual Fund

1 Re-engineering2 Obtaining Favorable Debt Financing (from PE reputation)3 Alignment of interests between Mng & PE

• Capitalization Rate
• NCREIF Property Index
• Sources of value creation in PE
• Gross income multiplier

Transaction-Based by regression of size, age, location etc.

• DOWNREIT
• hedonic index
• Exit Value
• Exit routes

1 Compensation of Mng: linked to performance2 Tag-along, drag-along clauses of Mng: can sell when being acquired3 Board representation of PE4 Noncompete clauses of Mng5 Priority in claims of div & assts of PE6 Require Approval of PE when strategic change7 Earn-outs: tie acquisition price to performance

• Alignment of interest between Management and PE
• Sources of value creation in PE
• Basic Forms of Real Estate Investment
• Performance Measurement of PE

sales price / gross income

• NCREIF Property Index
• hedonic index
• Gross income multiplier
• Buyounts types

investment cost + earnings growth + increase in price multiple + reduction in debt

• Clawback
• Exit Value
• Ratchet
• Exit routes

Residential:1 Single-family homes2 Multi-family propertiesNon-residential:1 Commercial real estate(1) Multi-family - Population Growth(2) Office - Job growthgross lease: owner responsible for operating expensesnet lease(3) Industrial/Warehouse - Overall economy(4) Retail - Consumer spendingpercentage lease:minimum rent + percent of sales(5) Hospitality(6) Parking(7) Restaurant2 Farmland3 Timberland

• PIC paid-in capital
• FFO funds from operations
• Property Classifications
• Venture Capital Method

Estimated cash NOI÷ Assumed cap rate= estimated value of operating real estate+ cash & accounts receivables- debt and other liab.= NAV÷ Share outstanding= NAV / Share

• REIT valuation: P/FFO approach
• REIT valuation: DCF approach
• REIT valuation: P/AFFO approach
• REIT valuation: NAV approach

DPI + RVPI

• PIC paid-in capital
• TVPI total value to paid-in capital
• RVPI residual value to paid-in capital
• DPI distributed to paid-in capital

Value of LP's holdings / cumulative invested capitalnet of fees & carried interests

• DPI distributed to paid-in capital
• PIC paid-in capital
• RVPI residual value to paid-in capital
• TVPI total value to paid-in capital

FFO÷ Share outstanding= FFO / share× sector avg P/FFO multiple= NAV / share

• REIT valuation: NAV approach
• REIT valuation: P/AFFO approach
• REIT valuation: DCF approach
• REIT valuation: P/FFO approach