Question

You manage a hedge fund with $400 million in assets. Your fee structure provides for a 1% annual management fee with a 20% incentive on returns over an 8% benchmark. If the fund value is $445 million at the end of the year, what is your fee? Group of answer choices

Answer 1

Answer:

the total fees for the year including the bonus are for 6,600,000 dollars

Explanation:

management fee:

400 x 1% = 4 million

bonus calculations:

8% benchmark:

400 x (1+0.08) = 432

amount above 432 million:

445 - 432 = 13 million

13 million x 20% = 2.6 million

total fee: 4,000,000 + 2,600,000 = 6,600,000