If the Risk-Free Interest Rate Is R_f and Equals the Fund's

question 57

Multiple Choice

If the risk-free interest rate is r_f and equals the fund's benchmark,the portfolio net asset value is S₀,and a hedge fund manager incentive fee is 20% of profit beyond that,the incentive fee is equivalent to receiving ______ call(s) with exercise price ________.

• A) 0.2; S₀
• B) 1; S₀(1 + r_f)
• C) 1.2; S₀
• D) 0.2; S₀(1 + r_f)

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Definitions:

United States

A country in North America, comprising 50 states, known for its significant influence on world politics, economy, and culture.

American Colonization Society

An organization founded in 1816 to assist free black people in emigrating to Africa.

Emigrated

The act of leaving one's country to live in another.

Liberia

A country on the West African coast, established as a colony for freed African American slaves in the 19th century.