Exam 17: Alternative Investments

In which of the following steps would a venture capitalist evaluate potential investment opportunities and ultimately present a letter of intent to a firm that has requested new funding?

Richard invested $750,000 in a hedge fund with a 2/20 fee structure. The fund had a total of $15 million of assets under management and it returned 12% and 19% in the first and second years, respectively. 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. How much will Richard pay in performance fees for the first two years, respectively?

A provision that ensures performance fees are not earned until the value of a fund exceeds its previous highest level is referred to as which one of the following?

Cripple Creek Funds (CCF)is exploring an opportunity to make a $10 million investment to help a small technology firm to expand to a value of $75 million over the next three years. What ownership fraction must CCF get in order to meet its required return of 50%?

In which of the following steps would a venture capitalist apply business expertise, share industry contacts, and perhaps even become involved with the day-to-day operations of the underlying firm?

Kimberlee invested $1.5 million in a hedge fund that has a 2/20 fee structure. The fund had a total of $26 million of assets under management and it returned 19% and 27% in the first and second years, respectively. 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. How much will Kimberlee pay in performance fees for the first two years, respectively?

Platinum is currently trading at $979.45 per ounce with a carrying cost of $1.05 per ounce per month for storage and insurance. Given a current market price of $1,019.29 per ounce for a five-month futures contract, what is the potential carry trade profit per ounce if the interest rate is 4%?

If a hedge fund has a 2/20 fee structure and $15 million of assets under management, how much will its annual management fee be?

Which of the following is a good that is nearly identical to other goods of the same type?

Which one of the following strategies is NOT exclusively available to the managers of alternative investment funds?

If the three-month futures contract price for silver is currently $18.83 per ounce, what should we expect the current spot price to be if the annual interest rate is 2.75%?

A private equity firm that makes debt-based investments is referred to as a(an)__________ fund.

You are considering whether you should purchase a rental property that you estimate to have a gross potential income of $93,000 per year. You expect the operating costs to be $39,000 per year. What is the NOI if the occupancy rate is expected to be 90%?

Which of the following best describes the 2/20 fee that is used by most hedge funds?