4. CMD Asset Management has the following fee structure for clients in its equity fund: 1.00% of first $5 million invested 0.75% of next $5 million invested 0.60% of next $10 million invested 0.40% above $20 million a. Calculate the annual dollar fees paid by Client 1, who has $27 million under manage- ment, and Client 2, who has $97 million under management. b. Calculate the fees paid by both clients as a percentage of their assets under management. c. What is the economic rationale for a fee schedule that declines (in percentage terms) with increases in assets under management?
4. CMD Asset Management has the following fee structure for clients in its equity fund: 1.00% of first $5 million invested 0.75% of next $5 million invested 0.60% of next $10 million invested 0.40% above $20 million a. Calculate the annual dollar fees paid by Client 1, who has $27 million under manage- ment, and Client 2, who has $97 million under management. b. Calculate the fees paid by both clients as a percentage of their assets under management. c. What is the economic rationale for a fee schedule that declines (in percentage terms) with increases in assets under management?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:4. CMD Asset Management has the following fee structure for clients in its equity fund:
1.00% of first $5 million invested
0.75% of next $5 million invested
0.60% of next $10 million invested
0.40% above $20 million
a. Calculate the annual dollar fees paid by Client 1, who has $27 million under manage-
ment, and Client 2, who has $97 million under management.
b. Calculate the fees paid by both clients as a percentage of their assets under
management.
c. What is the economic rationale for a fee schedule that declines (in percentage terms)
with increases in assets under management?
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