Practice Test Geeks(CIMA) Certified Investment Management Analyst Practice Test
← All CIMA Flashcard Decks

Investment Vehicles and Strategies Flashcards

7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Investment Vehicles and Strategies flashcards as text

  1. A hedge fund employs a long/short equity strategy. If the fund is net long 60% and net short 40%, what is the fund's net market exposure?

    Answer: 20%

    Net market exposure equals net long minus net short positions: 60% - 40% = 20%.

  2. Which feature distinguishes a closed-end fund from an open-end mutual fund?

    Answer: Closed-end funds issue a fixed number of shares traded on exchanges

    Closed-end funds have a fixed share count and trade on exchanges, often at premiums or discounts to NAV.

  3. A commodity-linked structured note provides principal protection and upside participation in crude oil prices. This product combines:

    Answer: A zero-coupon bond and a long call option on oil

    Principal-protected notes typically embed a zero-coupon bond (to guarantee return of principal) and a call option (to provide upside participation).

  4. An investor in a Master Limited Partnership (MLP) receives distributions. For tax purposes, most MLP distributions are treated as:

    Answer: Return of capital, reducing the investor's cost basis

    Most MLP distributions are considered return of capital, deferring taxes and reducing the investor's adjusted cost basis.

  5. Which strategy best describes a risk arbitrage approach in a merger situation?

    Answer: Buy target shares and short acquirer shares to capture the deal spread

    Risk (merger) arbitrage involves buying the acquisition target and shorting the acquirer to capture the spread between current price and deal price.

  6. In a currency overlay program, the overlay manager's primary objective is to:

    Answer: Manage foreign exchange risk separately from the underlying portfolio

    A currency overlay program separates the management of FX risk from the underlying asset management, allowing specialized hedging or active currency positioning.

  7. A collateralized loan obligation (CLO) is primarily backed by:

    Answer: A diversified pool of leveraged corporate loans

    CLOs are structured vehicles backed primarily by pools of leveraged (below-investment-grade) corporate loans.