Suppose the Risk-Free Return Is 6

question 16

Multiple Choice

Suppose the risk-free return is 6%.The beta of a managed portfolio is 1.5,the alpha is 3%,and the average return is 18%.Based on Jensen's measure of portfolio performance,you would calculate the return on the market portfolio as

• A) 12%
• B) 14%
• C) 15%
• D) 16%
• E) none of these

Understand the basic concepts and differences between hedge fund strategies, such as market-neutral and long-short hedges.

Comprehend how hedge fund managers are compensated, including management fees and incentive bonuses.

Recognize the financial requirements for investments in hedge funds, including the typical initial investment range.

Identify the regulatory characteristics and operational structures of hedge funds compared to mutual funds.

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Definitions:

Contamination

The presence of unwanted or harmful substances in something else, making it impure or unsafe.

Common Law

A legal system based on judicial decisions and precedents rather than statutory laws.

Visible Nuisance

An objectionable or annoying condition that can be seen, affecting the use or enjoyment of property.

Due Diligence

The obligation on the directors of a corporation to ensure that effective systems are in place to comply with legislation, and to monitor the systems to ensure compliance.