SIE Exam: Understanding Products and Their Risks Practice Test 9

A. Hedge fund expense ratios are identical to that of the average mutual fund.

B. Hedge funds spend proportionately less to research investment opportunities than the average mutual fund.

C. Hedge funds may incur more cost by purchasing derivatives that a typical mutual fund manager does not purchase.

D. Hedge funds pay the investment managers less compensation than a typical mutual fund does.

A. A hedge fund may not set up both an "offshore" and an "onshore" fund.

B. An "offshore" fund is generally set up as a Limited Liability Corporation (LLCs) or a limited partnership.

C. An "onshore" fund is usually established as a corporation with Articles of Incorporation in the United States.

D. U.S. investors in hedge funds pay U.S. taxes on earnings from hedge funds.

A. Mutual fund

B. Tenant in Common (TIC) transaction

C. Hedge fund

D. Unit Investment Trust (UIT)

A. It explains why the investment is registered with the SEC.

B. It explains why the investment is not registered with the Department of the Treasury.

C. It evaluates the risk of the investment.

D. It explains why an investor may only purchase no more than $25,000 worth of ownership.

A. The fund manager must notify the investors prior to changing the investment strategy.

B. The fund owes a fiduciary responsibility to the investors.

C. The fund may have dozens of investors.

D. The fund's risks and operations are described in a document.

A. Plan for operations

B. Minimum guaranteed return on investment over a three-year period

C. Fund manager's approach to investing

D. Fees

A. A hedge fund that plans to charge performance-based fees may have "qualified" investors.

B. An "accredited" investor must have a higher net worth than a "qualified" investor.

C. An accredited investor is an individual with annual income greater than $200,000 or a couple with annual income greater than $400,000.

D. A "qualified" investor is also a "super-accredited" investor.

A. Hedge fund

B. Exchange-traded Note (ETN)

C. Exchange-traded Fund (ETF)

D. Limited partnership

A. Diversification

B. Liquidity during the trading day

C. Professional Management

D. Conventional investment strategies

A. Mutual funds

B. Hedge funds

C. Tenant in Common (TIC) transactions

D. REITs