A Hedge Fund Sets Its Fee at 2% and a 20

question 22

Multiple Choice

A hedge fund sets its fee at 2% and a 20% carry with an 8% benchmark. How much money will a hedge fun make in fees over the course of a year if AUM started at $4,000,000 and ended the year at 5,300,000?

• A) $68,300
• B) $302,000
• C) $80,400
• D) $92,040

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, assessing the value today of an amount to be received in the future.

Maturity Value

The total amount payable to an investor at the end of a debt instrument's life, including the principal and any interest.

Accrued Interest

Interest that has been incurred but not yet paid, often related to bonds or loans.

Bond Issue Costs

The expenses associated with the issuance of bonds, including legal, accounting, underwriting fees, and other related costs.