Exam 17: Alternative Investments

A hedge fund manager who is trying to find trends in overall global markets, or individual sectors, is engaging in which type of strategy?

In which of the following steps would a venture capitalist formalize and agree upon the terms of a financing deal?

What type of structure would the founders of a new alternative investment fund use to avoid the requirement to register with the SEC?

Which of the following is the income after expenses generated by a property?

Judah invests $7 million in a hedge fund with a 2/20 fee structure. The fund has a total of $93 million of assets under management and the return in the first year is 22%. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year in which they are applicable. What is the amount of the performance fee that Mr. Dowdy will pay in the first year?

Hedge funds often institute a __________ period that requires investors to commit to a minimum time period before they can redeem any of their capital.

Mr. Banks has asked you to estimate the value of an income-producing property that he estimates to have gross potential income of $393,000 and a vacancy rate of 10%. The operating costs are expected to be $193,000 per year. You have found that a similar property with an NOI of $55,000 recently sold for $375,000.

What is the minimum return that a private equity fund manager is required to create prior to receiving any carried interest?

For which of the following strategies do fund managers try to identify mispricing relationships between securities that, in theory, should not exist?

In which of the following steps would a venture capitalist be most likely to assist with an initial public offering to raise additional capital for the underlying company?

Liberty Group is considering making an investment in a new firm that it expects to be worth $45 million in three years, at which point Liberty plans to exit the venture. Liberty is willing to make an initial investment of $10 million, but has a required return of 55% for this risky venture. What ownership fraction will Liberty require in order to make the investment?

Which one of the following allows an investor to benefit from price changes in commodities without physically owning the commodity?

Which of the following are the primary ways for private equity funds or venture capital funds to exit an ongoing capital agreement? I. Sale to another private equity fund II. Sale to another firm in the industry III. Failure of the firm IV. Initial public offering

__________ market transactions result in an actual physical exchange of a commodity.

What is the name of the valuation approach that involves the following steps: estimate the post-money valuation, determine the pre-money valuation, and determine the ownership fraction?

Richmond Funds has decide to investment in a new firm that it expects to be worth $50 million in four years when Richmond plans leave the venture. Richmond has established a 45% required return for this project and is planning to make an initial investment of $8 million. What ownership fraction will Richmond Funds require in order to make the investment?

Venture capital funds and private equity funds are typically structured as which of the following types of business?

Ingenious Corporation is evaluating an opportunity to make an investment in Binary Bits, Inc. The EBITDA for Binary Bits is currently $19 million, and similar deals have recently closed at a 6.0 multiple. The corporate tax rate is 21%. What is the estimated valuation for Binary Bits, Inc.?

Private equity funds generally provide funding and expertise to companies at which stages of their development? I. Seed stage II. Early stage III. Formative stage IV. Late stage

Mr. Fury is deciding whether to purchase an office building that he estimates to have operating costs of $750,000 per year, gross potential income of $2,000,000, and a vacancy rate of 10%. A similar property with an NOI of $1,000,000 recently sold for $10,000,000. What is the estimated value of this building?