Assume the Risk-Free Interest Rate Is 10% and Is Equal

question 8

Multiple Choice

Assume the risk-free interest rate is 10% and is equal to fund's benchmark, the portfolio net asset value is $100, and the fund's standard deviation is 20%. Also assume time horizon of 1 year.
-Assuming 2% management fee,what is the expected management compensation per share if the fund net asset value exceeds the stated benchmark?

• A) $4.24
• B) $4.00
• C) $3.84
• D) $2.20

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Definitions:

Second-level Outcomes

The indirect or subsequent results of actions or decisions, often more removed in time and not as immediately observable as first-level outcomes.

Instrumentality

The perceived relationship between performance and the attainment of desired outcomes or rewards.

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The use of computer software to enter, edit, format, and output text.

Expectancy Model

A psychological theory stating that an individual’s motivation is based on the expectation of desired outcomes and the value they place on those outcomes.