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

question 40

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.
Assuming a 2% management fee and a 20% incentive bonus, what is the expected management compensation per share if the fund's net asset value exceeds the stated benchmark?

• A) $4.24
• B) $4
• C) $3.84
• D) $2.20

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Definitions:

Freudian Psychoanalytic

A therapeutic approach and theory of personality developed by Sigmund Freud that emphasizes unconscious motivations and conflicts, especially as they originate in childhood.

Mania

A state or episode of euphoria or frenzied activity in which people may have an exaggerated belief that the world is theirs for the taking.

Motivational

Pertaining to motivation or being aimed at stimulating someone's desire to do something.

Behavioral

Relating to the actions or reactions of a person or animal in response to external or internal stimuli.