Judah invests $7 million in a hedge fund with a 2/20 fee structure. The fund has a total of $93 million of assets under management and the return in the first year is 22%. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year in which they are applicable. What is the amount of the performance fee that Mr. Dowdy will pay in the first year? $276,300
Judah invests $7 million in a hedge fund with a 2/20 fee structure. The fund has a total of $93 million of assets under management and the return in the first year is 22%. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year in which they are applicable. What is the amount of the performance fee that Mr. Dowdy will pay in the first year? $276,300
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:Judah invests $7 million in a hedge fund with a 2/20 fee structure. The
fund has a total of $93 million of assets under management and the
return in the first year is 22%. Assume that management fees are paid at
the beginning of each year and performance fees are paid at the end of
each year in which they are applicable. What is the amount of the
performance fee that Mr. Dowdy will pay in the first year?
O $276,300
O $273,840
O $1,369,200
O $283,900
O $300,000
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