Answer: $94.4 million.

## Calculation Explanation **Step 1: Calculate gross return value** - Beginning AUM = $80 million - Gross return = 25% - Gross return amount = $80 million × 25% = $20 million **Step 2: Calculate year-end AUM before fees** - Year-end AUM before fees = $80 million + $20 million = $100 million **Step 3: Calculate management fee** - Management fee = 2% of year-end AUM - Management fee = $100 million × 2% = $2 million **Step 4: Calculate incentive fee** - Incentive fee = 20% of gross return - Incentive fee = $20 million × 20% = $4 million **Step 5: Calculate total fees** - Total fees = Management fee + Incentive fee = $2 million + $4 million = $6 million **Step 6: Calculate AUM after fees** - AUM after fees = Year-end AUM before fees - Total fees - AUM after fees = $100 million - $6 million = $94 million **Step 7: Verify calculation** - Beginning AUM: $80 million - Gross return: $20 million - Management fee: $2 million (2% of $100 million) - Incentive fee: $4 million (20% of $20 million) - Total fees: $6 million - Ending AUM: $80 million + $20 million - $6 million = $94 million **Why Option B ($94.4 million) is incorrect:** Some might incorrectly calculate the incentive fee on the net return after management fee, but the problem states "management and incentive fees are calculated independently," meaning the incentive fee is based on gross return, not net return after management fee. **Why Option C ($97.6 million) is incorrect:** This would result from only charging one fee or miscalculating the fees significantly. **Correct answer is $94.0 million (Option A).**

Author: LeetQuiz .