TE10 Mock test 2 ss2

Q. An alternative investment fund’s hurdle rate is a:

• A. rate unrelated to a catch-up clause.
• B. tool to protect clients from paying twice for the same performance.
• C. minimum rate of return the GP must exceed in order to earn a performance fee.

Which of the following statements concerning different valuation approaches is most accurate?

• A. One advantage of the three-stage dividend discount model (DDM) model is that it is equally appropriate to young companies entering the growth phase and those entering the maturity phase.
• B. It is advantageous to use asset-based valuation approaches rather than forward-looking cash flow models in the case of companies that have significant intangibles.
• C. The justified forward price-to-earnings ratio (P/E) approach offers the advantage of incorporating fundamentals and presenting intrinsic value estimations.

None

• A. $107.03.
• B. $105.65.
• C. $99.75.

Q. Holding all other factors constant, the most likely effect of low demand and heavy new issue supply on bond yield spreads is that yield spreads will:

• A. widen.
• B. tighten.
• C. not be affected.

Q. Which of the following is a type of external credit enhancement?

• A. Covenants
• B. A surety bond
• C. Overcollateralization

None

• A. $812,920,131 .
• B. $815,383,474 .
• C. $817,846,817 .

Which of the following statements concerning the use of industry analysis is most accurate? Industry analysis is most useful for:

• A. sector allocations in passive equity portfolios.
• B. portfolio performance attribution.
• C. evaluating market efficiency.

Q. The potential benefits of allocating a portion of a portfolio to alternative investments include:

• A. ease of manager selection.
• B. improvement in the portfolio’s risk–return relationship.
• C. accessible and reliable measures of risk and return.

Q. Which of the following bond types provides the most benefit to a bondholder when bond prices are declining?

• A. Callable
• B. Plain vanilla
• C. Multiple put

Q. A credit derivative is a derivative contract in which the:

• A. clearinghouse provides a credit guarantee to both the buyer and the seller.
• B. seller provides protection to the buyer against the credit risk of a third party.
• C. the buyer and seller provide a performance bond at initiation of the contract.