1. 1. 6

   XYZ hedge fund has the following fee structure: Annual management fee based on year-end AUM 2% Incentive fee 20% Hurdle rate before incentive fee collection starts 4% Current high-water mark $610 million The fund has a value of $583.1 million at the beginning of the year. After one year, it has a value of $642 million before fees. The net return to an investor for this year is closest to:

   1. 7.64%.

   2. 7.75%

   3. 6.80%.

   4. 6.72%.