44. A hedge fund with an initial value of $100 million has a management fee of 2% and an incentive fee of 20%. Management and incentive fees are calculated independently using end-of-period valuation.
The value must reach the previous high water mark before incentive fees are paid. The table below
provides end-of-period fund values over the next three years.
Fund Value ($ millions)
Year Before Fees After Fees
1 120 113.6
2 110 107.8
3 125 ?
The total amount of fees earned by the hedge fund in Year 3 is closest to:
A. $4.8 million.
B. $5.5 million.
C. $5.9 million.
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