5-98 What Does a Hurdle Rate Specified by a Hedge

question 54

Multiple Choice

5-98 What does a hurdle rate specified by a hedge fund indicate?

• A)The maximum number of investors possible in the fund that would allow it to avoid regulations.
• B)The minimum amount required to be invested in the fund.
• C)The net worth criterion for an individual to be deemed an "accredited investor."
• D)The highest net asset value that the fund has previously achieved,above which the manager receives a performance fee.
• E)The minimum annualized performance benchmark that must be realized before a performance fee can be assessed.

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Definitions:

Sequential Games

Games in which players make decisions one after another, with later players having knowledge of the previous actions taken by other players.

Dominant Strategy

A strategy that is the best for a player in a game irrespective of the strategies chosen by other players.

Nash Equilibrium

A concept within game theory where no participant can benefit by changing strategies while the other participants keep theirs unchanged.

Maximin Strategy

A decision rule in game theory where a player maximizes the minimum gain that can be achieved, considering the worst-case scenario.