Which of the Following Is the Term Used to Link

question 62

Multiple Choice

Which of the following is the term used to link the hedge fund manager's incentives more closely to those of the fund investors and to reduce the manager's incentive to increase the risk of trades?

• A)High-water marks.
• B)Discount rates.
• C)Trade limits.
• D)Management fees.
• E)Low hurdle rates.

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Definitions:

Bonds

These are fixed-income investment products where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Debt Instruments

Financial assets that represent a debtor's obligation to repay borrowed money or other forms of credit to the creditor according to stated terms.

Original Issue Discount

The difference between the par (face) value of a bond and the lower price at which it was originally sold, which must be reported as interest income over the life of the bond.

Tax-exempt Debt

Debt securities issued by state or municipal governments whose interest payments are exempt from federal income tax, and sometimes state and local taxes.