CFA 2026 Level II Vignettes Alternative Asset Analysis Hedge Funds Free Quiz 1

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CFA 2026 Level II Vignettes Alternative Asset Analysis Hedge Funds Free Quiz 1

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CFA 2026 Level II Vignettes Alternative Asset Analysis Hedge Funds Free Quiz 1

Practice CFA 2026 Level II Vignettes Alternative Asset Analysis MCQs from Hedge Funds. Get instant results with Explanation.

General10 MCQs

1. Vignette 1: Hedge Funds - Case Study: An investor is evaluating a hedge fund. What is a hedge fund and what are its primary characteristics?

A. Hedge funds are mutual fundsB. Hedge funds are private pools of capital using diverse strategies to generate absolute returnsC. Hedge funds are only for retail investorsD. Hedge funds are regulated like mutual funds

2. What is the typical fee structure of a hedge fund?

A. Hedge funds charge only a management feeB. Hedge funds charge only a performance feeC. Hedge funds typically charge a management fee and a performance fee (2 and 20)D. Hedge funds have no fees

3. What is a high-water mark in hedge fund fee structures?

A. A high-water mark prevents performance fees on gains that just recover past lossesB. A high-water mark allows performance fees on all gainsC. A high-water mark is the same as the hurdle rateD. A high-water mark is not used in hedge funds

4. What is a hurdle rate in a hedge fund?

A. A hurdle rate is the same as a high-water markB. A hurdle rate is the maximum feeC. A hurdle rate is not used in hedge fundsD. A hurdle rate is a minimum return required before performance fees are earned

5. What are the liquidity terms of a hedge fund?

A. Hedge funds are fully liquid with no lock-up periodsB. Hedge funds have lock-up periods and limited redemption windowsC. Hedge funds allow daily redemptionsD. Hedge funds have no restrictions on withdrawals

General10 MCQs

6. Vignette 2: Hedge Funds - Case Study: A hedge fund manager uses a long/short equity strategy. What is a long/short equity strategy?

A. Long/short equity involves only long positionsB. Long/short equity involves only short positionsC. Long/short equity involves both long and short positions in equities to capture relative valueD. Long/short equity is the same as market neutral

7. What is a market neutral hedge fund strategy?

A. A market neutral strategy has zero net market exposure (beta ≈ 0)B. A market neutral strategy has high market exposureC. A market neutral strategy uses only long positionsD. A market neutral strategy is the same as long/short equity

8. What is an event-driven hedge fund strategy?

A. Event-driven strategies are based on macroeconomic trendsB. Event-driven strategies are the same as global macroC. Event-driven strategies only involve long positionsD. Event-driven strategies profit from corporate events like mergers and bankruptcies

9. What is merger arbitrage (risk arbitrage) in hedge funds?

A. Merger arbitrage involves buying both the target and acquirerB. Merger arbitrage involves buying the target and shorting the acquirerC. Merger arbitrage involves shorting the target and buying the acquirerD. Merger arbitrage is risk-free

10. What is a global macro hedge fund strategy?

A. Global macro strategies focus on individual stocksB. Global macro strategies are the same as long/short equityC. Global macro strategies take positions based on macroeconomic views in various marketsD. Global macro strategies are low-risk

📋 CFA - Test Online Practice Quizzes

CFA

Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Alternative Investments: 8 MCQs
Corporate Issuers: 7 MCQs
Derivatives: 5 MCQs
Economics: 7 MCQs
Equity Investments: 12 MCQs
Ethics: 16 MCQs
Financial Statement Analysis: 11 MCQs
Fixed Income: 11 MCQs
Portfolio Management: 9 MCQs
Quant Methods: 6 MCQs

Merit Formula: -

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