What to know
Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.
Alternative Investments
3. Investments in Private Capital: Equity and Debt practice questions
3. Investments in Private Capital: Equity and Debt is part of CFA Level I Alternative Investments. Alternative Investments questions emphasize private capital, real estate, infrastructure, natural resources, hedge funds, digital assets, and performance measurement. Use this page to review the controlling ideas, then work through 9 questions with answer explanations and common traps.
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Alternative Investments
3. Investments in Private Capital: Equity and Debt
Private equity is best described as capital that is:
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3. Investments in Private Capital: Equity and Debt
A strategy that provides capital to early-stage companies with high growth potential and uncertain operating histories is best described as:
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3. Investments in Private Capital: Equity and Debt
Compared with private equity, private debt most likely provides investors with:
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3. Investments in Private Capital: Equity and Debt
A private equity fund experiences negative reported performance in its early years because management fees and organizational costs are incurred before portfolio exits occur. This pattern is best described as:
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3. Investments in Private Capital: Equity and Debt
A private equity fund sells a portfolio company to an operating company in the same industry. This exit route is best described as a:
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3. Investments in Private Capital: Equity and Debt
A private debt instrument that combines senior and subordinated debt into a single loan facility is most accurately described as:
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3. Investments in Private Capital: Equity and Debt
A limited partner committed USD60 million to a private equity fund. The fund has called USD45 million. Cumulative distributions are USD18 million, and residual value is USD36 million. Based on called capital, the fund MOIC is closest to:
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3. Investments in Private Capital: Equity and Debt
A buyout fund increases expected equity returns mainly by using debt to finance the acquisition of mature companies and by improving operations. The risk most directly increased by the debt financing is:
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3. Investments in Private Capital: Equity and Debt
An investor is concerned that committing to a single private equity fund in a recession vintage could dominate realized results. The most appropriate way to reduce this timing risk is to:
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