Hedge Funds & Taxes Quiz

What is a hedge fund?

• It is a pool of investors' money with low risk investment

• a private investment fund run by partners

• It is the same as a pension fund

true or false: there are no specific requirements to invest in hedge funds

• true

• false

What kind of investors invest in hedge funds?

• only banks

• only very wealthy private investors

• banks, insurance companies, high-net worth individuals

To be a qualified or accrdited investor in a hedge fund, you need to

• have a minimum net worth of 2 million $ (excluding your primary residence)

• have a net worth of more than 1 million $ or an annual income of over 200,000 $

• have a net worth exceeding 1 million $ and a yearly income of more than 200,000$

a long/ short equity strategy is when

• buys underprices stocks while selling overpriced shares

• buys overprices shares while selling underpriced stocks

How do options work?

• a put is a bet that a stock will fall and a call is a bet that a stock will rise

• a put is a bet that a stock will rise and a call is a bet that a stock will fall

What does "hedging" or "hedged" mean?

• Protection against risk

• It's a type of car insurance

• It's a type of currency

Buck says to you, "I'm long Apple shares". What does he mean?

• He expects Apple's share price to increase

• He expects Apple's share price to fall

• Buck is buck wild -- nobody knows what he's thinkin'!

Dylan is short shares of Amazon. What does that mean?

• He'll make money if the Amazon share price increases

• He's lost his marbles

• He'll make money if the Amazon share price falls

Name two reasons why hedge funds use a long-short strategy (one choice)

• (1) for protection against rising prices; (2) to make money

• (1) for protection against falling prices; (2) to lose money

• (1) for protection against falling prices; (2) to make money