Reading 74: Alternative Investments-LOS o 习题精选 2011, investing, capital, compare, similar

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Session 18: Alternative Investments
Reading 74: Alternative Investments

LOS o: Discuss distressed securities investing, and compare venture capital investing with distressed securities investing.

 

 

Investing in distressed securities and venture capital investing are similar in all of the following ways EXCEPT:

A) illiquid investments.

B) a large investment requirement.

C) heavy involvement by investors.

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Only venture capital requires a large investment. Both remaining choices are true of both investing in distressed securities and investing in venture capital.

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A typical distressed security investment strategy would involve purchasing:

A) the debt of a distressed company, allowing the company to utilize the infusion of capital to avoid bankruptcy.

B) a controlling equity position in a company experiencing financial difficulties and replacing management with a team of turnaround specialists.

C) the debt of a struggling company, with the goal of ending up with an equity position in the reorganized company.

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A typical strategy is to invest in the debt of a company, continue to hold the position throughout the bankruptcy negotiations, and ultimately end up with equity in the new, revitalized operation.

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Investing in distressed securities is most similar to investing in which of the following asset classes?

A) Exchange-traded funds.

B) Venture capital.

C) Hedge funds.

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Investing in distressed securities is similar to venture capital investing because both strategies seek an equity position in a company that is eventually successful. Both are illiquid investments with long time horizons.

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The securities of companies that are either close to bankruptcy or have already filed for bankruptcy protection are called:

A) inactively traded securities.

B) discount securities.

C) distressed securities.

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Inactively traded securities are infrequently traded, but the name “inactively traded” does not imply anything about the financial condition of the company. “Discount” is a description that may be applied to any of number of investment vehicles available. Distressed securities are the securities of companies in the midst of financial difficulties.