Asked by Christopher Robin on Apr 27, 2024
Verified
Consider a hedge fund with $200 million at the start of the year. The benchmark S&P 500 Index was up 16.5% during the same period. The gross return on assets is 21%, and the expense ratio is 2%. For each 1% above the benchmark return, the fund managers receive a .1% incentive bonus.
What was the annual return on this fund?
A) 16.5%
B) 18.04%
C) 18.55%
D) 21%
Incentive Bonus
An additional payment or reward given to employees as a motivation for meeting or exceeding specified goals or objectives.
Expense Ratio
A measure of what it costs an investment company to operate a mutual fund, expressed as a percentage of the fund's assets.
Gross Return
The overall yield from an investment prior to subtracting any charges or costs.
- Understand the calculation of returns and evaluations of hedge fund performance.
Verified Answer
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Learning Objectives
- Understand the calculation of returns and evaluations of hedge fund performance.
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