Three methods to calculate capitalition rate 1. Market extraction method 2. Band of investment method 3. Buildup method Two Methods to calulate Market Value 1. Direct Income Capitalization 2. Gross Income Multipler BTW on the GIM: MV = gross income x gross income multiplier where (gross income multiplier - sales price/ gross income) Couldn’t they just do (MV = Sales Price)…jeez.
Which of the following most accurately describes the distribution of hedge fund returns? Hedge fund returns: A) are normally distributed. B) are lognormally distributed. C) have a platykurtic distribution. D) have fat tails in the distribution.
I have no idea, but I believe stock price returns are lognormally distributed, so I’ll go with that. B
D?
D is the answer.
Yeah, just looked it up. Good question. Thanks.
Damn I spoil you AF. Which of the following is most accurate in describing the betas of emerging market arbitrage hedge funds? These funds have: A) high betas in up markets and low betas in down markets. B) low betas in up markets and positive betas in down markets. C) low betas in both up and down markets. D) high betas in both up and down markets.
B
B
B it is
I just pulled this out of my A$$… Given the current Credit Crisis and the inability for Hedge Funds to lock in adequate financing terms, which Hedge Fund strategy should be most adversly impacted by this financing crisis? A) Long / Short Equity B) Distressed C) Fixed Income Arb D) Emerging Markets
C?
Word
The Built up Method is quite long so I used ancronyms to make it easier to remember For pure interest rate + liquidity premium + recapture premium + risk premium I think…PIRR As in PIRR says the little Real Estate kitty …okay i’m done.
caspian Wrote: ------------------------------------------------------- > I imagine there will be an entire vignette on real > estate valuation. You will probably have to > compute taxes payable for one question, CFAT for > another and ERAT for the last. The first three > will probably be valuation questions. Look at Schweser-Book-6 Exam-3AM Alt Invt Vignette (Q31 to Q36). It has exactly what you described!! I am 0/6 on that vignette and still don’t understand it 
AFJunkie Wrote: ------------------------------------------------------- > I just pulled this out of my A$$… > > Given the current Credit Crisis and the inability > for Hedge Funds to lock in adequate financing > terms, which Hedge Fund strategy should be most > adversly impacted by this financing crisis? > > A) Long / Short Equity > B) Distressed > C) Fixed Income Arb > D) Emerging Markets Is it because Fixed income arbitrage requires leverage heavily? Also, thinking about LTCM, wasn’t their crash the only case in credit crisis late 90’s?
leverage compounds the effect of the credit spreads
My logic is that more leverage --> more cash to meet post margin requirment. plus Fixed income ABers long credit risk, short T bond, with the hope that panic in the market would be gone eventually. when credit crisis gets worse, they bust eventually. So Junkie, what’s the answer?
here’s one i made up: bob is having a discussion about real estate and hedge funds with rob. bob states that if the selling price is less than the purchase price the recaptured depreciation will be calculated using net selling price minus book value of property. he also states that a risk of investing in hedge funds that some failing managers may not share their poorly performing fund data with the public. rob is inclined to go against bob at first but decides to do his own research. he does a quick scan of his CFA textbooks and realizes that bob may be right. however, he learned that bob was recently released from a federal prison for insider trading. he doesn’t trust bob so he doesn’t agree with both of his statements. which is most accurate? a) rob is correct in regards to the first statement but incorrect with the second statement b) rob is correct in regards to the first statement and correct with the second statement c) rob is incorrect in regards to the first statement and correct with the second statement d) rob is incorrect in regards to the first statement but incorrect with the second statement
Sortino Ratio: Risk adjusted measure similar to Sharpe. Instead of dividing returns in excess of the risk free rate by the standard deviation of returns, Sortino emphasizes “MAR”. MAR can be 1) User defined, 2) zero or 3) the risk free rate. Compound returns in excess of MAR are adjusted for risk by dividing them by downside deviation. Pinkman- what does ‘positive beta’ mean in the emerging market arb question? Does it mean in a down market the fund shows less vol than the index, and in an upmarket the fund will have a performance higher than the index? Thanks.