CSC CSC - Canadian Securities Course Alternative Investments and Structured Products Questions and Answers

Question 1

Which of the following is a key characteristic that distinguishes hedge funds from traditional mutual funds?

Accepted Answer

Hedge funds can use leverage, short selling, and derivatives to pursue absolute returns

Answer

Unlike mutual funds, hedge funds can employ strategies such as leverage, short selling, and complex derivatives, aiming for positive absolute returns regardless of market direction.

Question 2

What is a Real Estate Investment Trust (REIT)?

Accepted Answer

A company that owns, operates, or finances income-producing real estate and distributes most income to unit holders

Answer

A REIT is a company that owns or finances income-generating real estate and is required to distribute the majority of its taxable income to unitholders, providing investors with real estate exposure without direct property ownership.

Question 3

What does the term 'lock-up period' refer to in the context of alternative investments?

Accepted Answer

A minimum holding period during which investors cannot redeem their investment

Answer

A lock-up period is a predetermined time during which hedge fund investors are prohibited from withdrawing their capital, allowing the fund manager to execute longer-term strategies without liquidity pressure.

Question 4

Which alternative investment strategy involves simultaneously buying and selling related securities to profit from price discrepancies?

Accepted Answer

Arbitrage strategy

Answer

Arbitrage involves exploiting price differences of equivalent or related securities across markets or instruments, typically by buying the underpriced asset and simultaneously selling the overpriced one.

Question 5

What is the primary investment objective of a market-neutral hedge fund strategy?

Accepted Answer

To generate returns that are independent of overall market direction by balancing long and short positions

Answer

A market-neutral strategy aims to produce positive returns regardless of market direction by holding balanced long and short positions, thereby minimizing exposure to broad market movements.

CSC - Canadian Securities Course Practice Test

CSC - Canadian Securities Course Practice Test

CSC CSC - Canadian Securities Course Alternative Investments and Structured Products Questions and Answers