|
LOS n: Explain the three components of return for a commodity futures contract and the effect that an upward- or downward-sloping term structure of futures prices will have on roll yield.
Q1. Jill Beaman, CFA, notices that for wheat futures there is a downward-sloping term structure of futures prices. Beaman should recognize that this would be associated with:
A) normal backwardation and a negative roll return.
B) contango and a positive roll return.
C) normal backwardation and a positive roll return.
Q2. With respect to a commodity futures contract, the collateral return:
A) is the opportunity cost of storing the commodity.
B) represents the return on a fully hedged commodity position which should be approximately the risk-free rate.
C) is highly correlated with the spot rate.
Q3. Jill Beaman, CFA, has recorded the components of the return on a commodity futures contract. The return on the futures contract is $17, the spot return is $9, and the roll return is $5. What is the collateral return?
A) $3.00.
B) $6.89.
C) $31.00.
$3 = $17 ? $9 ? $5
Q4. Jake Billingsly, CFA, and Paula Sloop, CFA, are investigating alternative investments for their clients. They have both institutional and private wealth clients, and Billingsly and Sloop have investigated the special issues that alternative investments raise for investment advisers of private wealth clients. When compared to institutional clients, Billingsly says that decision risk is higher for private wealth clients, and Sloop says that tax issues are generally more complex for private wealth clients.
Billingsly and Sloop review the principal classes of alternative investments, and they compare the features of real estate, private equity, commodity investments, hedge funds, managed futures, buy-out funds, infrastructure funds, and distressed securities. Some of their clients have been interested in venture capital funds, but Billingsly and Sloop think that buy-out funds may be a better alternative. Compared to venture capital, Billingsly says that buy-out funds tend to have lower leverage. Compared to venture capital, Sloop says that buy-out funds tend to have steadier cash flows.
Some of the institutional clients have held venture capital investments for several years. Billingsly and Sloop anticipate some of these investments are approaching the exit stage. As they look over the investments held by the institutional clients, they anticipate that the institutions’ investments in venture capital will most likely realize their value through one of four ways: i) the entrepreneurs buying out the venture capital investment from the venture capitalists, ii) a merger with another company, iii) an acquisition by another company, or iv) an initial public offering when the company in which the venture capital is invested and goes public (IPO).
Commodities are another area of interest. Many of both the private wealth clients and the institutional investors have asked if commodities would be good hedges against inflation. To accommodate the demand for inflation hedges, Billingsly and Sloop arrange for the clients to take long positions in energy, livestock, industrial metals, and precious metals. They want to use futures contracts that have the potential for the highest roll yield with a buy-and-hold strategy. They specifically focus on the topics of backwardation and contango and plot the roll returns for historical commodity futures over their respective lives. Billingsly and Sloop notice that the returns generally change over the life of each commodity futures contract and take this into account in their investment plans.
Billingsly and Sloop look at different types of hedge funds. They analyze the different styles and the fees the managers charge. They notice that one of the most popular hedge fund strategies attempts to identify overvalued and undervalued equity securities. The strategy takes long and short positions, but the goal of the fund is not necessarily to be market neutral or industry neutral. They find that the fee structures generally have three components. There is also a feature called a high water mark, and they discuss the rationale for the high water mark.
Billingsly makes a statement about the decision risk and Sloop makes a statement about tax issues of private wealth clients compared to institutional clients. With respect to these statements:
A) both Billingsly and Sloop are incorrect.
B) Billingsly is correct and Sloop is incorrect.
C) both Billingsly and Sloop are correct.
Q5. Billingsly and Sloop compare buy-out funds to venture capital. With respect to the statements they make:
A) Billingsly is correct and Sloop is incorrect.
B) both Billingsly and Sloop are correct.
C) Billingsly is incorrect and Sloop is correct.
Q6. Of the ways that Billingsly and Sloop estimate that firms invested in venture capital might exit and realize the value of their investment, the one that is not among the usual methods of exit is:
A) an IPO.
B) a merger with another company.
C) entrepreneurs buying out the venture capital investment from the venture capitalists.
Q7. With a futures buy-and-hold strategy, a positive roll yield would be associated with a commodity yield curve that exhibits:
A) backwardation, and the return decreases as it approaches maturity.
B) contango, and the return increases as it approaches maturity.
C) backwardation, and the return increases as it approaches maturity.
Q8. The hedge fund style that Billingsly and Sloop find to be the most popular, and that they describe, would most likely be categorized as:
A) convertible arbitrage.
B) hedged equity.
C) merger arbitrage.
Q9. The rationale for the high water mark is to:
A) make sure managers get paid when the value of the fund increases steadily.
B) prevent managers from getting overpaid when the value of the fund oscillates.
C) prevent managers from getting overpaid when the value of the fund increases steadily. | 
发表于 2009-3-11 09:55
| 
