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SGrade/CFA Level 1/Alternative Investments — Core Concepts

CFA L1 · 20 questions

Alternative Investments — Core Concepts Practice Questions

This topic covers the essential principles of Alternative Investments as tested in the CFA Level 1 exam.

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Sample questions

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Question 1Foundation

A hedge fund charges a "2 and 20" fee structure. This means the manager earns:

A2% of assets under management and 20% of net profits.
B2% of net profits and 20% of assets under management.
C2% of assets under management and 20% of gross profits.

Examiner's Design Intent

Tests fundamental knowledge of hedge fund fee structures, which is core to understanding alternative investment economics and manager incentives

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Question 2Foundation

Which type of private equity investment typically involves providing capital to young companies for their initial growth and expansion?

ALeveraged buyout (LBO).
BVenture capital (VC).
CMezzanine financing.

Examiner's Design Intent

Tests foundational understanding of private equity strategy definitions and their appropriate application to different company lifecycle stages

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Question 3Foundation

Which of the following is a common characteristic of most alternative investments?

AHigh liquidity and transparent pricing.
BLow management fees and simple fee structures.
CSpecialized management and limited public information.

Examiner's Design Intent

Tests fundamental understanding of what makes alternative investments 'alternative' - foundational knowledge before diving into specific types

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+ 17 more Alternative Investments — Core Concepts questions in this set

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More CFA L1 topics

Ethical and Professional Standards — Core ConceptsQuantitative Methods — Core ConceptsEconomics — Core ConceptsFinancial Statement Analysis — Core ConceptsCorporate Issuers — Core ConceptsEquity Investments — Core Concepts
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