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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Critical Thinking

The intellectually disciplined process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, and/or evaluating information.

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An 18th-century French philosopher known for his theory of separation of powers, which influenced modern democratic governments.