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Which of the following defines a hedge fund the most?
1. A collective investment model based on issuing a fixed number of shares which are not redeemable from the fund.
2. A negotiable security that represents securities of a foreign company and allows that company's shares to trade in the U.S. financial markets.
3. A diversified portfolio that typically does not limit the number of shares it can offer, and they are bought and sold on demand.
4. A type of investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio construction and risk-management techniques to improve performance.
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Hedge fund is larger pool of investment that are collected from large number of investors and managed by highly dedicated managers.
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- Differences between hedge funds and mutual funds are that Multiple Choice A hedge fund managers can pursue strategies not available to mutual funds, such as short selling, heavy use of derivatives, and leverage. B hedge funds are typically open only to wealthy or institutional investors. C hedge funds are only subject to minimal SEC regulation. D hedge funds are commonly structured as private partnerships. E All of the options.arrow_forwardWhich of the following statements is correct? A. Investors appreciate illiquid assets in their portfolios as they can easily sell them off to cover margin calls. B. Liquid assets can quickly be converted into cash without changing prices too much. O C. Corporate bonds are among the most liquid financial assets as they trade at a very high frequency. D. Liquid assets tend to be cheaper as investors are not willing to pay for their liquidity benefits.arrow_forwardYou are looking for an investment vehicle that has two characteristics. First, you want an incentive structure for asset managers where they earn more money when you (the investor) earns more money. Second, you want a mostly diversified pool of investments. Which vehicle is your best option? O Hedge fund Closed-end mutual fund Open-end mutual fundarrow_forward
- 'Since they engage in less trading than most other mutual funds, they generate a limited amount of capital gains that must be distributed to shareholders. This statement refers to which of the following types of funds? A. Index funds B. Growth funds C. Bond funds OD. Dividend funds ...arrow_forwardThe risk of default on the part of the importer—risk of noncompletion—is present as soon as: A) Private equity funds differ from traditional venture capital funds. List and discuss three differences between them.arrow_forward“The Capital Asset Pricing Model [CAPM] assumes that the stock market is dominated by well-diversified investors who are concerned with specific risk. “ is the following statment correct? And explain why.arrow_forward
- • Having researched derivatives for investment portfolios, is a need for them as hedging vehicles in corporate finance? If so, how would one incorporate derivatives in a investment program?arrow_forwardWhich of the following best describes an insured asset allocation strategy: 1) a long run strategy that takes into account global investing 2) a strategy that adjusts the portfolio mix as capital market expectations change 3) a strategy that examines capital market conditions and the investor's objectives to establish a portfolio mix. 4) none of the abovearrow_forwardWhich of the following statements is false? A. Internal controls are the processes by which the firm ensures that it presents accurate financial statements. B. Greenfield investments provide uncertain cash flows with high yields and high growth potential. C. Footnotes allow investors or any users to improve their assessments of the amount, timing, and uncertainty of the estimates reported in financial statements. D. Secondary markets are the markets in which existing, already outstanding securities are traded among investors.arrow_forward
- Private equity funds invest either in the equity of publicly traded or private firms, wanting to become private, or in early-stage firms. Select one: True Falsearrow_forwardQuestion 5 a) “If markets are semistrong-form efficient, investors would only adopt passive investment strategies and buy into an index fund, rather than active strategies where they would have a portfolio manager select the components of their portfolios and seek for mispriced equities.” Explain if you agree with this statement, in no more than 150 words.arrow_forward2. Is Warren Buffet’s Berkshire Hathaway mutual fund safer than US T Bonds (or opportunity costs)? How would you prove this statement?arrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
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