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Free CFA Alternative Investments Practice Questions & Answers

550 exam-style Alternative Investments questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.

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Question 181

A fund has: - Peak value: 120 - Trough value: 90 Drawdown = ?

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Question 182

A fund’s returns below zero are: –1%, –3%, –2%. Downside deviation (simple average of absolute values) = ?

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Question 183

A fund has: - Total variance: 9% - Factor‑explained variance: 6% Idiosyncratic variance = ?

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Question 184

A fund has: - Beta = 0.7 - Market return = –8% Expected contribution from beta = ?

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Question 185

A fund’s returns have: - Correlation with credit spreads: –0.6 - Fund volatility: 10% - Credit spread volatility: 5% Credit beta = ?

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Question 186

A fund’s factor model shows: - Market beta: 0.5 - Credit beta: –0.3 - Volatility beta: 0.2 Which factor contributes most to risk if factor volatilities are: - Market vol: 15% - Credit vol: 10% - Volatility index vol: 25% Compute absolute contributions:

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Question 187

A multi‑strategy fund’s biggest internal risk is:

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Question 188

A FoF that invests in many similar strategies may suffer from:

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Question 189

A FoF invests: - 40% in Strategy A (vol = 10%) - 60% in Strategy B (vol = 20%) Assume zero correlation. Portfolio volatility = ?

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Question 190

A FoF invests: - 30% in a fund with 15% return - 70% in a fund with 5% return Weighted return = ?

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Question 191

A FoF invests: - 25% in a fund with vol 8% - 75% in a fund with vol 12% Correlation = 1 Portfolio vol = ?

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Question 192

A FoF invests: - 60% in Fund A (return 6%) - 40% in Fund B (return –2%) Portfolio return = ?

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Question 193

A FoF invests: - 50% in a fund with correlation 0.8 to equities - 50% in a fund with correlation 0.2 Portfolio correlation = ?

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Question 194

A key reason investors add hedge funds to a traditional 60/40 portfolio is:

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Question 195

A hedge fund with low correlation to equities most likely:

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Question 196

A hedge fund’s marginal contribution to risk measures:

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Question 197

A hedge fund with negative correlation to equities is most useful for:

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Question 198

A hedge fund with high standalone volatility can still reduce portfolio risk if:

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Question 199

A hedge fund with high correlation to bonds is most likely to:

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Question 200

A hedge fund with equity‑like returns but lower volatility improves a portfolio by:

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Question 201

A hedge fund that reduces portfolio drawdowns most likely has:

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Question 202

A hedge fund with positive alpha contributes to a portfolio by:

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Question 203

A hedge fund with high correlation during crises may provide:

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Question 204

A hedge fund with low factor exposure is most likely to:

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Question 205

A hedge fund with high Sharpe ratio improves a portfolio by:

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Question 206

A hedge fund that uses derivatives for hedging most likely:

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Question 207

A hedge fund with low liquidity may show:

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Question 208

A hedge fund with high leverage contributes to portfolio risk by:

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Question 209

A hedge fund with negative beta contributes to a portfolio by:

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Question 210

A portfolio is 60% equities (vol 15%) and 40% bonds (vol 5%), correlation = 0.2. Portfolio volatility = ?

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Free CFA Alternative Investments Practice Questions & Answers

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Thank you