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Hedge Fund Investment Exam Practice

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Finance

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Exam Practice

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Exam 1
1. A __________ is a private investment pool open only to wealthy or institutional investors that are
exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds
hedge fund
2. Which one of the following is not an example of a brokered market?
NASDAQ
3. Margin traders bet that the price will _____ and short-sellers bet that the price will ____.
Rise; fall
4. The Hydro Index is a price-weighted stock index based on the 5 largest boat manufacturers in the
nation. The stock prices for the five stocks are $10, $20, $80, $50, and $40. The price of the last stock
was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a price-
weighted index?
4.5
5. An investor in a T-bill earns interest by _________.
buying the bill at a discount from the face value to be received at maturity
6. Which one of the following is a true statement regarding the Dow Jones Industrial Average?
It is a price-weighted average of 30 large industrial stocks.
7. Rank the following fund categories from most risky to least risky:
I. Equity growth fund
II. Balanced fund
III. Sector fund

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IV. Money market fund
III, I, II, IV
8. Consider the following limit order book of a specialist. The last trade in the stock occurred at a price of
$40. If a market buy order for 100 shares comes in, at what price will it be filled?
A limit order allows you to set the price at which you want to buy or sell a stock.
In this case, the specialist would have the option of matching the buy order with the lowest limit sell
order ($40.25) or set an asking price lower than 40.25 and trade from his own stock
The market buy order for 100 shares shall be filled in with $40.25
9. If an investor places a _________ order, the stock will be sold if its price falls to the stipulated level. If
an investor places a __________ order, the stock will be bought if its price rises above the stipulated
level.
stop-loss; stop-buy
10. Which of the following is not a true statement regarding municipal bonds?
A municipal bond is a debt obligation issued by the federal government.
11. Advantages of investment companies to investors include all but which one of the following?
Guaranteed rates of return
12. A T-bill quote sheet has 90-day T-bill quotes with a 4.92 bid and a 4.86 ask. If the bill has a $10,000
face value, an investor could buy this bill for _____.
13. You sold short 100 shares of AAPL at P=$500. The initial margin is 60% and the maintenance margin
is 30%. What is on the asset side of your margin account?

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Exam 1 1. A __________ is a private investment pool open only to wealthy or institutional investors that are exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds hedge fund 2. Which one of the following is not an example of a brokered market? NASDAQ 3. Margin traders bet that the price will _____ and short-sellers bet that the price will ____. Rise; fall 4. The Hydro Index is a price-weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50, and $40. The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a priceweighted index? 4.5 5. An investor in a T-bill earns interest by _________. buying the bill at a discount from the face value to be received at maturity 6. Which one of the following is a true statement regarding the Dow Jones Industrial Average? It is a price-weighted average of 30 large industrial stocks. 7. Rank the following fund categories from most risky to least risky: I. Equity growth fund II. Balanced fund III. Sector fund IV. Money market fund III, I, II, IV 8. Consider the following limit order book of a specialist. The last trade in the stock occurred at a price of $40. If a market buy order for 100 shares comes in, at what price will it be filled? A limit order allows you to set the price at which you want to buy or sell a stock. In this case, the specialist wo ...
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Really useful study material!

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