For asset allocation purposes, asset classes should be specified such that correlations of returns are relatively:...

For asset allocation purposes, asset classes should be specified such that correlations of returns are relatively:
1. Low within each asset class and low among asset classes.
2. High within each asset class and low among asset classes.
3. Low within each asset class and high among asset classes.

Interest rate swaps are:
1. Highly regulated.
2. Equivalent to a series of forward contracts.
3. Contracts to exchange one asset for another.

A hedge fund that operates as an activist shareholder is most likely engaging in:
1. A macro strategy.
2. A relative value strategy.
3. An event-driven strategy.

Which component of the return on a long futures position is related to differences between spot prices and future prices?
1. Roll yield.
2. Price return.
3. Collateral yield.

Greenfield investments in infrastructure are most accurately described as investments in assets:
1. That are operating profitably.
2. That have not yet been constructed.
3. Related to environmental technology.

Expert Solution

Q1) B) High within each asset class, and low among asset classes.

Explanation: The assets within the class should be positively related and asset classes should be negatively correlated to decrease the risk.

Q2) B) Equivalent to a series of forward contracts.

Explanation: An interest rate swap is equivalent to a series of forward contracts, each created at swap price.

Q3) C) An event driven strategy

Explanation: An activist shareholder tries to affect the decision of the company and management, when the decision is not in the favour of the shareholders. And this thing happens on the happening or non happening of an event.

Q4) B) Price return

Explanation: Difference between spot price and future price is called price return.

Roll yield is generated by rolling over futures when they mature

Q5) B) That have not yet been constructed

Explanation: Greenfield investment means building up everything from ground level. It is Brownfield investment which happens when a company modifies or purchases existing company.

jeff jeffy answered 2 years ago

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