6% + Ut + Et repassive fund before fees reactive fund before fees = 1.80% =rstock index +1.1* restock index where the error terms ut and t are independent over time and of each other, have zero means E(u) = E(+) = 0, and volatilities of var(u+) = 15% and (var(+) = 4%. The hedge fund uses the same strategy as the active mutual fund, but implements the strategy as a long-short hedge fund, applying 4 times leverage, generating the following return before fees: Question 6 hedge fund before fees = 4 * (ractive fund before fees - stock index) Suppose that the passive fund has a fee of 0.30% and the active fund has a fee of 1.40%. An investor has $40 invested in the active fund and $60 in cash. He changes his investment to an equivalent investment in the hedge fund, the passive mutual fund, and cash (i.e., with the same alpha and the same exposures to restock index and +). Which management fee for the hedge fund makes the two investments identical in terms of net returns (assume that the hedge fund charges a zero performance fee)? a. 4.44% b. 4.00% c. 5.60% d. 5.30% O e. 4.52% f. 4.40%