A hedge fund has USD 100 million of investors’ funds and its fees are 2 plus 20%. The fund manager chooses a highly risky strategy that has a 50% chance of producing a profit of USD 30 million and a 50% chance of a loss of USD 12 million. The hurdle rate is 4% and the management fees are based on the beginning of the asset. What is the net expected return to the investor?
A hedge fund has USD 100 million of investors’ funds and its fees are 2 plus 20%. The fund manager chooses a highly risky strategy that has a 50% chance of producing a profit of USD 30 million and a 50% chance of a loss of USD 12 million. The hurdle rate is 4% and the management fees are based on the beginning of the asset. What is the net expected return to the investor? A.$9.0 million; B.$4.4 million; C.$4.6 million; D.$4.2 million