TUTORIAL 1 – PRIVATE EQUITY

1. Which of the following statements is true about the regulation of alternative investments
compared to traditional investments?

a) Alternative investments are typically more regulated than traditional investments.

b) Alternative investments are typically less regulated than traditional investments.

c) Both alternative and traditional investments have the same level of regulation.

d) Alternative investments are not subject to any regulatory oversight.

2. Why might some investors choose to include alternative investments in their portfolio?

a) Because alternative investments are highly regulated and safe.

b) Because alternative investments offer guaranteed returns.

c) Because alternative investments provide high liquidity.

d) Because alternative investments can provide diversification and potentially higher returns.

3. What type of companies does venture capital primarily target?

a) Large, well-established corporations

b) Non-profit organizations

c) Start-ups and companies in their early stages of development

d) Government agencies

4. Why do start-ups seek venture capital funding?

a) To repay existing debts

b) To fund day-to-day operational expenses

c) To finance product development, marketing efforts, and infrastructure expansion

d) To acquire other companies in the same industry

5. What is a key advantage of growth equity investments over early-stage venture capital
investments?

a) Higher returns on investment

b) Reduced risk for the companies receiving growth equity

c) Faster growth for the portfolio companies

d) A higher level of control for growth equity investors

6. Which of the following least describe the characteristics of leveraged buyouts?

a) Potential Privatization

b) Debt-Financing

c) Minority Stakes

d) Emphasis on restructuring

7. What is one of the potential benefits of investing in distressed companies that have successfully
recovered?

a) Stable and consistent returns

b) Potential high returns due to increased debt or asset value

c) Low-risk investments with guaranteed profits

d) Access to exclusive IPO opportunities

8. Which type of partner in a private equity partnership has unlimited personal liability for the
partnership's debts?

a) Limited partners

b) General partners

c) Both limited and general partners

d) The partnership itself

9. During which phase of the "J-Curve" are returns in private equity investments expected to spike
significantly?

a) Years 1-3

b) Years 3-5

c) Years 5-10

d) Returns remain flat throughout the investment period

10. Which of the following is a characteristic of private equity investments?

a) High market efficiency

b) Short investment horizon

c) High liquidity

d) Long investment horizon

11. What differentiates listed equity from private equity concerning liquidity?

a) Listed equity has high liquidity, while private equity has low liquidity

b) Both listed equity and private equity have low liquidity

c) Both listed equity and private equity have high liquidity

d) Listed equity has low liquidity, while private equity has high liquidity