You Have Made a $500,000 Investment in a Hedge Fund

question 9

Multiple Choice

You have made a $500,000 investment in a hedge fund that has a 2/20 fee structure. The fund has a total of $25 million of assets under management and provides a return of 15% in the first year. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year in which they are applicable. How much will you pay in management and performance fees for the year?

• A)$1,000; $11,250
• B)$1,000; $12,700
• C)$10,000; $11,250
• D)$10,000; $12,700
• E)$10,000; $15,000

---

Definitions:

Entire Business

Refers to the complete scope or operation of a company, encompassing all its functional areas and activities.

Legal Costs

Expenses associated with the legal process, including lawyer fees, court fees, and other costs incurred during legal proceedings.

Unsuccessfully Defending

Pertains to an outcome where attempts to protect or assert a position, claim, or legal right do not succeed.

Intangible Asset

A non-physical asset having value due to its intellectual or proprietary characteristics, such as patents, trademarks, and goodwill.