TRUE OR FALSE? Only the answers, no explanation is needed. Answer all of them on 30 minutes please.

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

Question 61

Emerging Markets Risk: Emerging markets average returns are riskier (and generally higher)

than developed market returns.

True

False

Question 62

International Benefits: The benefits (employing the Markowitz efficient frontier) from

international diversification are oftentimes enhanced in bear markets because correlations

tend to ratchet downward (towards zero).

True

False

Question 64

In the Money Put Option. An in-the-money put option would be where the exercise price is

greater than the stock price.

True

False

Question 65

Implied Volatility: If the anticipated volatility forecast by the analyst is greater than the implied

volatility (the standard deviation of stock returns consistent with the options price), the call option

is considered a buy. If the anticipated volatility is less, the analyst should consider selling or

writing the call option.

True

False

Question 66

DuPont Analysis: It is often useful to decompose a firms ROE or ROA or ROIC into the

product of several accounting ratios and to analyze their separate behaviors over time (i.e., trends)

and across companies (i.e., cross sectional) within an industry.

True

False

Question 67

Growth Theory: The expected growth rate of earnings is related both to the firms expected

profitability (ROE) and to its dividend policy, more specifically the retention rate.

True

False

Question 69

Fiscal & Monetary Policy: The traditional tools of macro-policy are government spending and

tax collection, which constitute fiscal policy, and manipulation of the money supply, which

constitute monetary policy, primarily through the use of the fed funds rate, discount rate, open

market operations, and quantitative easing.

True

False

Question 70

Private Equity Business Model: The four-step process of a private equities manager is to

recapitalize the acquired public company, cut costs, maximize free cash flows, and finally, return

the company to the public market, usually via an IPO or sale to a strategic buyer.

True

False