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12 multiple-choice questions and 9 flashcards on Alternative Investments, about 3% of the CFA Level I bank. Every one carries a written rationale.
Alternative Investments is one of 10 chapters in CoStudy's CFA Level I bank, and it holds 12 of the bank's 401 multiple-choice questions — roughly 3% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
3 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
A commodity futures investor experiences 'contango' when:
Answer: A — Futures prices exceed spot, creating negative roll yield
A) Correct — an upward-sloping curve where futures > spot; rolling into more expensive contracts drags returns. B) The reverse pattern is backwardation, which produces positive roll yield. C) Zero basis is a coincidence, not the definition of contango. D) Flat curves reflect equal storage and convenience yield.
Hedge funds typically charge what fee structure?
Answer: C — 2% management fee plus 20% performance fee
A) Passive index-fund pricing, not hedge funds. B) Typical of mutual funds, not hedge funds. C) Correct — classic '2 and 20' hedge fund structure. D) Extremely rare; management fee funds base operations.
A private-equity fund's 'J-curve' return pattern reflects:
Answer: A — Early negative returns then later exit gains
A) Correct — fees and early markdowns depress NAV first. B) Constant returns are not the J-curve pattern. C) That inverts the actual timing of distributions. D) That would be an inverted or failed-fund pattern.
4 cards from the 9 in this chapter.
What is net asset value (NAV) for a REIT?
Total asset value − total liabilities. Per-share NAV is used to determine if a REIT is trading at a premium or discount.
What is private equity?
Investment in non-publicly traded companies. Includes buyouts (LBOs), venture capital, growth capital, and distressed investing.
What is a leveraged buyout (LBO)?
Acquiring a company primarily using debt (leverage). The acquired company's cash flows are used to service and repay the debt.
What is a commodity index?
An index tracking the prices of a basket of commodities (e.g., S&P GSCI, Bloomberg Commodity Index). Provides exposure to commodity returns.
These are a sample. The full Alternative Investments chapter runs 21 items with per-chapter progress tracking, on the web and in the iOS app.