Explanation:
Management fee = $370 million * 2% = $7.4 million
Incentive fee = ($400 million - $7.4 million - $370 million) * 20% = $4.52 million
Total fees = Management fee + Incentive fee = $7.4 million + $4.52 million = $11.92 million
Q.3500 A hedge fund has a beginning year value of $370 million and a 2 plus 20 fee structure with no hurdle rate or watermark. The hedge fund structure is set up such that the management fee is calculated on the assets at the beginning of the year and that the incentive fee is calculated net of the management fee. If the fund's ending value is $400 million, then what are the total fees paid to the hedge fund for the period?
A
$12.4 million.
B
$11.92 million.
C
$16 million.
D
$4.4 million.
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