Sample Questions
Question 1
Easy
Decentralized finance (DeFi) is best described as:
Solution
A is correct.
DeFi encompasses financial applications built on decentralized blockchain networks, using smart contracts to automate services such as lending, borrowing, trading, and insurance without relying on traditional financial intermediaries like banks.
DeFi encompasses financial applications built on decentralized blockchain networks, using smart contracts to automate services such as lending, borrowing, trading, and insurance without relying on traditional financial intermediaries like banks.
Question 2
Medium
What is the primary purpose of a lock-up period in a hedge fund?
Solution
C is correct.
A lock-up period prohibits investors from redeeming their capital for a defined period (often 1–2 years after initial investment), giving the hedge fund manager the flexibility to take positions in illiquid assets without the risk of forced selling to meet redemptions.
A lock-up period prohibits investors from redeeming their capital for a defined period (often 1–2 years after initial investment), giving the hedge fund manager the flexibility to take positions in illiquid assets without the risk of forced selling to meet redemptions.
Question 3
Hard
Which of the following best describes a 'side pocket' in a hedge fund?
Solution
B is correct.
A side pocket segregates illiquid, hard-to-value, or distressed assets from the main liquid portfolio. Investors allocated to the side pocket cannot redeem that portion until those assets are sold or otherwise realized, preventing forced sales at depressed prices and treating all investors equitably regardless of redemption timing.
A side pocket segregates illiquid, hard-to-value, or distressed assets from the main liquid portfolio. Investors allocated to the side pocket cannot redeem that portion until those assets are sold or otherwise realized, preventing forced sales at depressed prices and treating all investors equitably regardless of redemption timing.
