Alternative Investments II

Alternative Investments II

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Question 1 of 10

1. Question
Forms of Commodity Investments

Which of the following is the least accurate for commodity futures?
- The futures price is marked to market daily.
- Counterparty risk is high as the other party may not have the resources to fulfil the contract.
- They are usually cash settled. There is no physical delivery of the underlying commodity.
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Question 2 of 10

2. Question
Forms of Commodity Investments

Match the needs of the entities to the most appropriate derivative contract. (drag and drop the boxes)
Sort elements
- An airline wishes to hedge against increase in oil price at a future date
- A copper miner wishes to maintain a specific price that it can sell copper at
- A speculator wishes to bet on a fall in gold price
- Long option contract
- Enter into a swap, taking the fixed receiver side
- Short futures contract
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Question 3 of 10

3. Question
Forms of Commodity Investments

Rank the following instruments based on how closely they can potentially track the spot price of gold. (highest first)
- A precious metals mutual fund of which gold comprises 80% of the holdings
- Gold futures contract (delivery in 1 year)
- Gold ETF which holds actual physical gold
- Shares of a gold mining company
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Question 4 of 10

4. Question
Commodity Prices and Investments

A commodity has very little convenience yield, but the storage costs are high. What is the most likely effect on its futures price?
- The futures price curve is in contango
- The futures price curve is in backwardation
- The futures price curve is flat
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Question 5 of 10

5. Question
Commodity Prices and Investments

The 3 sources of commodities futures returns are:
- Roll yield, convenience yield, change in spot price
- Roll yield, change in spot price, collateral yield
- Collateral yield, risk-free interest, roll yield
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Question 6 of 10

6. Question
Real Estate Investments

Which of the following least describes a mortgage-backed security?
- It is a form of equity investment in real estate
- It is often securitised into tranches with different payout priorities and risk characteristics
- The underlying is a pool of mortgages
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Question 7 of 10

7. Question
Camilia desires a form of real estate investment in which the returns is quite stable, and not highly correlated with other forms of real estate. Which of the following best meets her criteria?
- REITs
- Farmland
- Timberland
Correct

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Question 8 of 10

8. Question
Real Estate Investments

Edwin’s portfolio is too heavy on equities and he wishes to diversify through real estate investments. Which of the following is least suitable?
- REITs
- MBS
- Residential property
Correct

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Question 9 of 10

9. Question
Infrastructure Investments

Rank the following infrastructure investments from the lowest risk to the highest risk.
- Shares of a holding company that is embarking on a greenfield infrastructure in a developing country
- ETF which invests in several brownfield infrastructure in the US
- MLP that invests in several greenfield infrastructure in emerging markets
- Direct investment in a brownfield infrastructure in the US
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Question 10 of 10

10. Question
Issues in Performance Appraisal

Ruslan is a consultant would like to determine the risk-adjusted return of a REIT for his client. This client is only concerned about downside risk. Which of the following metric is the most appropriate?
- Treynor Ratio
- Sharpe Ratio
- Sortino Ratio
Correct

Incorrect

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