A hedge fund with $25 million of assets under management has a standard 2/20 fee structure and earns 14 percent this year. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year. Assume that the fund’s fee structure also contains a high-water mark provision.

a. What is the management fee collected by the fund managers?

b. What is the performance fee collected by the fund managers?

c. What is the investor’s net return?