CAIA Practice EXAM QUESTIONS AND

CAIA Practice EXAM QUESTIONS AND ANSWERS 100% SOLVED (Newest 2025) What assets are often chracterized as traditional by some

and alternatives by others in: hedge funds, private equity,

and real assets - Correct Answers ✅Hedge Funds: Liquid

alternative mutual funds

Private Equity: Closed-end funds with illiquid holdings

Real Assets: Public real estate and public equities of

corporations with performance dominated by stable positions in real assets

• major methods of analysis that distinguish the analysis of

alternative investments from trad. investments - Correct Answers ✅Return Computation Methods, Statistical Methods, Valuation Methods, Portfolio Management Methods Define investment - Correct Answers ✅Investment is any deferred consumption

• major types of real assets other than land and other types

of real estate - Correct Answers ✅Natural Resources, Commodities, Infrastructure, and IP

• return characteristics that differentiate trad. and alt

investments - Correct Answers ✅Diversification, Illiquidity, Inefficiency, Nonnormality 1 / 4

CAIA Practice EXAM QUESTIONS AND ANSWERS 100% SOLVED (Newest 2025) Define Active Management - Correct Answers ✅Refers to efforts of buying and selling securities in pursuit of superior combos of risk and return Define an incomplete market - Correct Answers ✅Refers to lack of investment opportunities that causes market participants to be unable to implement an investment strategy that satisfices their exact preferences such as risk

• major types of alt investments - Correct Answers ✅Real

Assets, HF, PE, Structured Products When did avg quality corp bonds and international equities become commonly viewed as institutional quality inv. in US? - Correct Answers ✅Between 1950-1980

• major legal documents necessary for establishing and

managing a HF - Correct Answers ✅Private-Placement memoranda, partnership agreement, subscription agreement, & management company operating agreement What is qualified majority? - Correct Answers ✅More than 75% of LPs voting to make a decision 2 / 4

CAIA Practice EXAM QUESTIONS AND ANSWERS 100% SOLVED (Newest 2025) What is Systematic Risk? - Correct Answers ✅Risk in the potential for economy wide losses attributable to failures or concerns over potential failures in markets

• constraints against achieving alternative investment

benefits through liquid products - Correct Answers ✅Leverage, Regulatory constrains on concentration, Illiquidity constraints Difference between a hard hurdle and soft hurdle rate - Correct Answers ✅Hard hurdle rate limits incentive fees to profits in excess of the hurdle rate Soft hurtle rate allows fund managers to earn an incentive fee on all profits, given the hurdle rate has been acheived is IRR a dollar-weighted return or a time-weighted return? - Correct Answers ✅IRR is the primary method of computing dollar-weighted return What is the primary cause of the shape of the J-curve of interim private equity fund returns? - Correct Answers ✅It is caused by a combo of early expense recognition, early loss recognition, and deferred gain recognition An investment has two solutions for its IRR. What can be said about the investment and the usefulness of the two 3 / 4

CAIA Practice EXAM QUESTIONS AND ANSWERS 100% SOLVED (Newest 2025) solutions? - Correct Answers ✅There are two sign changes in the cash flow stream of the investment. None of the IRRs should be used What scenario will a clawback clause lead to payments? - Correct Answers ✅Designed to return incentive fees to LPs when early profits are followed by subsequent losses General term denoting compound interest when the interest is not continuously compounded? - Correct Answers ✅Discrete compounding What is an ex post excess return? - Correct Answers ✅A realized return expressed as an excess return by subtracting the riskless return from the assets total return What does it mean to bootstrap a yield curve? - Correct Answers ✅Process of recursively estimating spot rates using one or more zero-coupon bonds on the short end and coupon bonds on the medium and long term regions of the term structure Which theory of the term structure of interest rates do all bonds have the same expected return? - Correct Answers ✅Unbiased expectations theory

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