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:

Bell-Shaped Distribution

A graphical representation of data that displays a normal distribution, which appears as a symmetrical bell-shaped curve.

Random Samples

A selection method used in research to gather participants from a larger population in a way that each individual has an equal chance of being chosen.

Population Averages

Statistical measures that summarize the central tendency of a collection of data, representing the average characteristics of a population.

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of numerical data.