Asked by Gwyneth Paulino on Jun 10, 2024
Verified
Consider a hedge fund with $250 million in assets at the start of the year. If the gross return on assets is 18% and the total expense ratio is 2.5% of the year-end value, what is the rate of return on the fund?
A) 15.05%
B) 15.5%
C) 17.25%
D) 18%
Total Expense Ratio
It quantifies the total cost of fund management and operating expenses, expressed as a percentage of the fund’s total assets.
Gross Return
The total return on an investment before any deductions are made for costs or expenses.
- Analyze the return structures of hedge funds and the impact of fees on returns.
Verified Answer
EK
Emily KiesslingJun 13, 2024
Final Answer :
A
Explanation :
$250,000,000(1.18) = $295,000,000
0.025(295,000,000) = $7,375,000 = 15.05%
0.025(295,000,000) = $7,375,000 = 15.05%
Learning Objectives
- Analyze the return structures of hedge funds and the impact of fees on returns.