Assume that you have invested $500,000 to purchase shares in a hedge fund reporting $800 million in assets, $100 million in liabilities, and 70 million shares outstanding. Your initial lockout period is 3 years.
-If the share price after 3 years increases to $15.28,what is the value of your investment?

Question

Quizplus · Accepted Answer

The value of your investment after 3 years is calculated by multiplying the number of shares you own by the new share price. Initially, the net asset value per share is ($800 million - $100 million) / 70 million shares = $10. After 3 years, the share price is $15.28. Your initial investment of $500,000 at $10 per share means you own 50,000 shares. Therefore, the value of your investment is 50,000 shares * $15.28 = $764,000.

Assume That You Have Invested $500,000 to Purchase Shares in a Hedge