Consider a Hedge Fund with $200 Million at the Start

question 53

Multiple Choice

Consider a hedge fund with $200 million at the start of the year. The benchmark S&P 500 index was up 16.5% during the same period. The gross return on assets is 21% and the expense ratio is 2%. For each 1% above the benchmark return the fund managers receive 0.1% incentive bonus. Using the management cost calculated, what was the annual return on this fund?

• A)16.50%
• B)18.04%
• C)18.55%
• D)21.00%

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Definitions:

Conditioned Stimulus (CS)

In classical conditioning, an originally neutral stimulus that, after association with an unconditioned stimulus (US), comes to trigger a conditioned response (CR).

Pavlov's Experiments

A series of studies conducted by Ivan Pavlov that demonstrated classical conditioning, where dogs learned to associate a neutral stimulus (bell) with an unconditioned stimulus (food), leading to a conditioned response (salivating).

Salivary Conditioning

A form of classical conditioning where an automatic and natural response, like salivation, is trained to respond to a previously neutral stimulus.

Unconditioned Response (UR)

An instinctive, automatic response to a stimulus that takes place without any earlier learned behavior or conditioning.