20+ Interview Questions and Answers

Fund Accountant interview questions on hedge funds, IRR formula, and journal entries for accrual and prepaid.

• Hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets.

• IRR (Internal Rate of Return) is a metric used to measure the profitability of an investment. Formula: NPV = 0 = CF0 + CF1 / (1 + IRR) + CF2 / (1 + IRR)^2 + ... + CFn / (1 + IRR)^n

• Journal entry for accrual: Debit expense account,...read more

Retained earnings are the portion of a company's profits that are kept by the company instead of being distributed as dividends.

• Retained earnings are a measure of a company's financial health and its ability to reinvest in itself.

• They are calculated by subtracting dividends paid to shareholders from the company's net income.

• Retained earnings can be used for various purposes such as research and development, debt reduction, or expansion.

• If a company has negative retained earni...read more

Mutual funds are open to all investors, while hedge funds are only open to accredited investors.

• Mutual funds are regulated by the SEC, while hedge funds are not.

• Mutual funds are more diversified, while hedge funds are more focused on specific strategies.

• Mutual funds have lower fees, while hedge funds have higher fees and require larger minimum investments.

• Mutual funds are required to disclose their holdings regularly, while hedge funds are not.

• Examples of mutual funds include...read more

Yes, hedge funds operate in India.

• Hedge funds have been operating in India since the early 2000s.

• The Securities and Exchange Board of India (SEBI) regulates hedge funds in India.

• Some examples of hedge funds operating in India are AQR Capital Management, Bridgewater Associates, and DE Shaw.

• Hedge funds in India primarily invest in equities, fixed income, and derivatives.

Equity represents ownership in a company and can be affected by stock splits, dividends, right issues, and bonus issues.

• Equity represents ownership in a company, giving shareholders a claim on assets and earnings.

• Stock splits increase the number of shares outstanding while decreasing the share price proportionally.

• Dividends are payments made by a company to its shareholders from its profits.

• Right issues allow existing shareholders to purchase additional shares at a discounted...read more

ABS/MBS securities are financial instruments that represent a pool of underlying assets such as mortgages or loans.

• ABS stands for Asset-Backed Securities and MBS stands for Mortgage-Backed Securities.

• These securities are created by pooling together similar types of assets and then selling them to investors.

• Investors receive payments based on the cash flows generated by the underlying assets.

• ABS/MBS securities played a significant role in the 2008 financial crisis.

• Examples of ...read more

A fund accountant is responsible for managing financial records and reporting for investment funds.

• Maintains accurate financial records for investment funds

• Prepares financial statements and reports for investors

• Calculates and distributes profits and losses to investors

• Monitors compliance with regulatory requirements

• May work for hedge funds, private equity firms, or mutual fund companies

Mutual funds are regulated investment vehicles that pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. Hedge funds are private investment partnerships that are not subject to the same regulations as mutual funds and are typically only available to accredited investors.

• Mutual funds are regulated investment vehicles that are open to all investors and are subject to strict regulations.

• Hedge funds are private investment partn...read more

Fund accounting is a specialized accounting system used by non-profit organizations and government agencies to track and manage funds.

• It involves tracking and reporting on the use of funds for specific purposes

• It is used by organizations such as charities, universities, and government agencies

• It requires strict adherence to accounting standards and regulations

• Examples include tracking donations for a specific project or program, or managing government grants for a specific pu...read more

Mutual funds are open-end investment vehicles that pool money from multiple investors to invest in a diversified portfolio of securities. Hedge funds are private investment partnerships that use various strategies to generate high returns for a select group of investors.

• Mutual funds are regulated by the Securities and Exchange Commission (SEC) and are available to the general public.

• Hedge funds are typically only available to accredited investors and have fewer regulatory res...read more

Golden rules of accounting are basic principles that guide the accounting process.

• The first golden rule is the rule of debit and credit.

• The second golden rule is the rule of assets and liabilities.

• The third golden rule is the rule of income and expenses.

• These rules help ensure accuracy and consistency in financial reporting.

• For example, the rule of debit and credit states that for every debit entry, there must be a corresponding credit entry.

• Similarly, the rule of assets and ...read more

Financial products are instruments or contracts that represent a financial interest, while financial markets are platforms where these products are traded.

• Financial products are instruments or contracts that allow individuals or organizations to invest, save, or manage risk.

• Examples of financial products include stocks, bonds, mutual funds, derivatives, insurance policies, and loans.

• Financial markets are platforms where buyers and sellers come together to trade financial prod...read more

Master-feeder structure is a common investment structure where multiple feeder funds pool their assets into a single master fund.

• Master fund is the main fund that receives investments from feeder funds.

• Feeder funds are separate funds that pool capital from investors and then invest in the master fund.

• Allows for economies of scale and efficient management of investments.

• Commonly used in hedge funds and private equity funds.

• Example: A hedge fund may have multiple feeder funds f...read more

A hedge fund is a type of investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets.

• Hedge funds are typically only available to high net worth individuals and institutional investors.

• They use a variety of investment strategies, including leveraging and short selling, to generate high returns.

• Hedge funds are less regulated than traditional investment funds and are not required to disclose their holdings to the ...read more

Zero coupon bonds are bonds that are issued at a discount to their face value and do not make periodic interest payments.

• Zero coupon bonds are also known as discount bonds.

• Investors earn a return by purchasing the bond at a discount and receiving the full face value at maturity.

• Since zero coupon bonds do not make interest payments, they tend to have higher interest rate risk.

• Examples of zero coupon bonds include U.S. Treasury STRIPS and corporate zero coupon bonds.

Trade life cycle refers to the stages a trade goes through from initiation to settlement.

• Trade initiation - trade is proposed and agreed upon by parties involved

• Trade execution - trade is executed on the market

• Trade confirmation - parties confirm details of the trade

• Trade settlement - final exchange of cash and securities

• Trade reconciliation - ensuring records match between parties

A hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets.

• Hedge funds are typically open to a limited number of accredited investors and require a large initial investment.

• They use a variety of strategies to generate returns, including long and short positions, leverage, and derivatives.

• Hedge funds are known for their flexibility in investment strategies and their ability to generate high re...read more

GAV (Gross Asset Value) is the total value of a fund's assets, while NAV (Net Asset Value) is the value of the fund's assets minus its liabilities.

• GAV includes all assets owned by the fund, such as investments, cash, and receivables.

• NAV is calculated by subtracting the fund's liabilities, such as expenses and debts, from its total assets.

• GAV is used to determine the overall value of the fund, while NAV is used to calculate the value of each individual share in the fund.

• For ex...read more

Derivatives are financial instruments whose value is derived from an underlying asset or group of assets.

• Types of derivatives include options, futures, forwards, and swaps.

• Options give the holder the right, but not the obligation, to buy or sell an asset at a specified price before a certain date.

• Futures are contracts to buy or sell an asset at a predetermined price on a specified date in the future.

• Forwards are similar to futures but are customized contracts traded over-the-...read more