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

question 43

Multiple Choice

Assume the risk-free interest rate is 10% and is equal to the fund's benchmark, the portfolio's net asset value is $100, and the fund's standard deviation is 20%. Also assume a time horizon of 1 year.
What is the exercise price on the incentive fee?

• A) $100
• B) $105
• C) $110
• D) $115

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Definitions:

Uncertainty Or Risk

Refers to situations where the outcome of an event is unknown and can impact objectives negatively or positively.

Penalty Clause

A contractual provision that imposes a penalty on a party for not meeting certain conditions or deadlines.

Performed According

Actions or tasks executed in compliance with specified standards, requirements, or agreements.

Procurement Team

A group of individuals with the responsibility of acquiring goods and services needed for a project or organization.