When Alternative Assets of Investors Are Pooled Together into a Single

question 87

Multiple Choice

When alternative assets of investors are pooled together into a single pool of assets,

• A) the collection of assets is formed as a limited partnership.
• B) one or more general partners are responsible for running the organization.
• C) the limited partners are only liable to the extent of their investments.
• D) the limited partners provide most of the capital.
• E) All of these are correct.

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Definitions:

Diversifiable Risk

A type of investment risk that can be reduced or eliminated in a portfolio through diversification, as it is not correlated with market movements.

Risk Premium

The extra return expected by an investor for holding a risky asset, over and above the risk-free rate.

Discount Rate

The interest rate used in calculating the present value of future cash flows. It reflects the time value of money and risk.

Real Interest Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the real cost of funds to the borrower and the real yield to the lender or investor.