53 Free Online CFA Level 1 Practice Questions on Alternative Investments

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apply P/E multiple against NI

• LBO valuation PE multiple
• PIC (Paid in capital)
• LBO - cash sweep
• short volatility

e.g. distressed investments or risk arbitrageCapital structure arbitrage implementations of distressed investments include spreads bt many parts of a given company's capital structure, perhaps by buying debt and selling short the stock or trading credit default swaps against stock options

• CAPM IRR
• hurdle rate
• Event driven
• hotel motel

low standard deviation of returns as they explicitly hedge. the risk and size of the long positions are highly correlated with the risk and size of the short positionsMake money slowly and lose money quickly, which leads to unattractive negative skewness and fat tail risk

• hedgefund strategy Convertible bond arbitrage:
• Fixed-income arbitrage
• Hedgefund biases
• hedgefund strategy - Arbitrage based

MV = gross income x gross income mulitplier

• Gross Income multiplier technique
• post money and pre money
• Fixed-income arbitrage
• gross income mulitplier

LP's unrealized return value of LP's holdings in the fund / cumulative invested capitalNAV after distribution(the net non distributed value) / paid in capital

• PIC (Paid in capital)
• DPI (Distributed to paid in capital)
• RVPI (residual value to paid in capital
• NPV in real estate

taxes = (net operating income (NOI) - depredation- interest) x tax rate

• Beta equity
• NPV in real estate
• post money and pre money
• Income taxes payable for CFAT

Net operating incomeLess Annual Debt service=before tax cashflowLess tax payable=Aftertax cash flow

• equity reversion after taxes (ERAT)
• Income taxes payable for CFAT
• equity cash flow method
• Computing cash How after taxes (CFAT).

1.deal-by-deal method: carried interest paid after each individual deal (profit x carried interest %)2. total return method 1 . Carried interest paid only after the portfolio value exceeds committed capital 3. total return method 2: Carried interest paid when the value of the portfolio exceeds invested capital by some min amt (total exit value x carried interest %)

• distribution waterfall
• PIC (Paid in capital)
• equity reversion
• hurdle rate

NAV after distribution in prioir year + capital called down − Management fee + operating results

• NAV before distribution
• target IRR method
• Recaptured depreciation
• NAV after distribution

long a convertible bond and short the underlying equity.Market neutrality is achieved when the size of the short-stock position matches the long-delta position of the embedded call options. These funds perform well when stock volatility increases (the long call option gains value) and when credit spreadsdecline (the long fixed-income position gains value)

• Fixed-income arbitrage
• hedgefund strategy - Arbitrage based
• hedgefund strategy Convertible bond arbitrage:
• DPI (Distributed to paid in capital)