3. Question 3 (Hedge fund contracts and incentives to take risk). This ques- tion is loosely related to lecture 15 which briefly talked about hedge fund manager contracts. Our goal here is to think through how the hedge fund contract impact the fund manager's incentive to take risk. Consider a hedge fund that only runs for a year, and it has assets under management (AUM) of $1 billion. The manager is paid by a standard "2+20" hedge fund contract. That is, at the end of the year, he collects management fees of 2% of AUM, and if the fund's return is above 0% (the hurdle rate), he collects 20% of that in performance fees. For instance, suppose the fund's return is 5%, which amounts to $1 billion