Chapter 12 & 16 Investment Companies and Alternative Investments

Question 1

NAV

Answer 1

(total fund assets - total liabilities)/outstanding shares

Question 2

no load 12b-1

Answer 2

25 basis points or less

Question 3

Primary commodities

Answer 3

unaltered from their natural state - corn, sugar, coffee

Question 4

Secondary commodities

Answer 4

Modified but are also considered homogeneous inputs into the production of final products

oil, iron ore, high fructose corn syrup

Question 5

Seed

Answer 5

Significant amounts of market research and product development

Question 6

Startup

Answer 6

First significant investment is used for marketing and production

Question 7

Emerging

Answer 7

Product is launched - even more capital is required

Question 8

Expansion

Answer 8

Growth stage

Question 9

Bridge

Answer 9

Transition from being a relatively unknown business to a mature company that is ready to be acquired by another firm or IPO - VC sells ownership at this stage

Question 10

Funding risk

Answer 10

investor is unable to make payments to fund
fund is unable to make timely investments
investor could lose entire capital

Question 11

Liquidity risk

Answer 11

forced to sell shares at steep discount

Question 12

Market risk

Answer 12

values of private equity fluctuates with economic conditions
can be sensitive to interest rates, foreign currency rates and commodity prices

Question 13

Exit risk

Answer 13

Fund manager experience and expertise
Ability to manage multiple groups of business owners
Ability in coordinating visions and strategic plans