Which of the Following Best Describes the 2/20 Fee That

question 74

Multiple Choice

Which of the following best describes the 2/20 fee that is used by most hedge funds?

• A)The fund pays a 2% management fee and gives 20% of the profits to the investor.
• B)The fund pays a 2% management fee and keeps 20% of the profits.
• C)The investor pays a 2% management fee and receives 20% of the profits.
• D)The investor pays a 20% management fee and receives 80% of the profits.
• E)The investor pays a 2% management fee and gives 20% of the profits to the fund manager.

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Definitions:

Consideration

The value (such as money, service, or goods) promised to another when making a contract.

Binding Contract

A legally enforceable agreement between two or more parties that is binding in a court of law.

Co-Worker

An individual who works with another in the same organization or on the same project, but not necessarily having the same rank.

One-Sided Agreement

A contract where the terms and conditions are favorable to one party, often at the expense of the other party.