Assume the risk-free interest rate is 10% and is equal to fund's benchmark, the portfolio net asset value is $100, and the fund's standard deviation is 20%. Also assume time horizon of 1 year.
-What is the exercise price on the incentive fee?

Question

Quizplus · Accepted Answer

The exercise price on the incentive fee is calculated by applying the risk-free rate to the portfolio's net asset value. With a risk-free rate of 10%, the exercise price is $100 * (1 + 0.10) = $110.

Assume the Risk-Free Interest Rate Is 10% and Is Equal