Investment Vehicles Flashcards
7 cards from real IAR 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 flashcards as text
A hedge fund employing a 'long/short equity' strategy primarily seeks to profit by:
Answer: Going long stocks expected to rise and shorting stocks expected to fall
Long/short equity funds take long positions in stocks believed to be undervalued and short positions in overvalued stocks, seeking market-neutral or directional alpha.
Which statement accurately describes the tax treatment of qualified dividends for individual US investors?
Answer: Qualified dividends are taxed at preferential long-term capital gains rates
Qualified dividends paid by domestic corporations and certain foreign corporations to shareholders meeting holding period requirements are taxed at favorable long-term capital gains rates.
A business development company (BDC) primarily invests in:
Answer: Small and mid-sized private or thinly traded US companies
BDCs are closed-end funds regulated under the '40 Act that provide debt and equity capital to small and mid-sized private US businesses.
When interest rates rise, which bond characteristic causes the greatest price decline?
Answer: Long maturity and low coupon (high duration)
Bonds with long maturities and low coupons have the highest duration, making them most sensitive to interest rate changes and causing the greatest price decline when rates rise.
Which of the following best describes a 'wrap account' offered by an investment adviser?
Answer: An account bundling management, trading, and custody services for a single all-inclusive fee
A wrap account bundles portfolio management, transaction costs, and custodial services into a single comprehensive fee, typically expressed as a percentage of assets.
Which risk applies specifically to limited partnership investments that is generally absent in publicly traded stock investments?
Answer: Liquidity risk due to lack of a secondary market
Limited partnership interests typically lack a readily available secondary market, making it difficult for investors to exit their positions, creating significant liquidity risk.
An interval fund differs from a traditional closed-end fund in that it:
Answer: Offers periodic redemptions at NAV during specified repurchase windows
Interval funds offer periodic (e.g., quarterly) share repurchases at NAV rather than trading on an exchange, providing limited liquidity without daily redemption obligations.