Question 57

Hedge Fund Philosophies: Hedge fund philosophies can oftentimes be characterized as macro &

managed futures, relative value, equity biased, and event driven. Hedge funds have a long / short construction.

True

False

Question 58

Capitalized Earnings Valuation: For firms with no growth opportunities (i.e., no PVGO), the P/E

ratio is simply the reciprocal of the capitalization rate (i.e. the required rate of return).

True

False

Question 59

Structured Assets. Structuring is the process of reengineering cash flows from existing asset

exposures (i.e. portfolios of mortgages, credit card debt, etc.). Financial structuring (or

engineering) enables different investors to hold claims with different risk exposures (labeled as

tranches) from the same underlying assets.

True

False

Question 60

ROE Determinants: A firms current ROE is a key determinant of the (potential) growth rate of

its earnings.

True

False