Series 7 practice questioneasyAlternative Investments — Hedge Funds
To invest in most hedge funds, an individual must qualify as an accredited investor, which requires a minimum net worth of:
- A$500,000
- B$5,000,000
- C$2,000,000
- D$1,000,000 (excluding primary residence)✓ Correct answer
Explanation
Why D — $1,000,000 (excluding primary residence)
Under SEC Regulation D, an accredited investor must have a net worth exceeding $1,000,000 (excluding the value of their primary residence) or annual income exceeding $200,000 individually ($300,000 with a spouse) for the last two years with a reasonable expectation of the same. These requirements exist because hedge funds are less regulated and carry higher risks.
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