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Answer: €6.8 million.
### Explanation The correct answer is **A** (€6.8 million). Here's the breakdown: 1. **End-of-Year AUM Calculation**: - Beginning AUM: €200 million - Annual return before fees: 15% - End-of-year AUM before fees: €200 million * 1.15 = €230 million 2. **Management Fee**: - 1.5% of €230 million = €3.45 million 3. **Incentive Fee Calculation (Net of Management Fees and Hard Hurdle Rate)**: - Hard hurdle rate: 5% of €200 million = €10 million - Net AUM for incentive fee: €230 million - €200 million - €3.45 million - €10 million = €16.55 million - Incentive fee: 20% of €16.55 million = €3.31 million 4. **Total Fees**: - Management fee + Incentive fee = €3.45 million + €3.31 million = €6.76 million ≈ €6.8 million **Why not B or C?** - **B** (€7.5 million) incorrectly calculates the incentive fee gross of management fees. - **C** (€8.8 million) excludes the hard hurdle rate in the incentive fee calculation.
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An analyst evaluates a hedge fund with the following details:
A
€6.8 million.
B
€7.5 million.
C
€8.8 million.