Hedge fund usually charges its investors an incentive fee of 20% of total returns. Use the following scenario analysis for hedge fund A and B to answer the following questions. Suppose the initial value of each fund is $100M and return information in each scenario is given below. For simplicity, assume that management fees other than incentive fees are zero for all funds.

Bear market Normal market Bull Market Probability 0.4 0.4 0.2 Fund A ($100M) -40% 5% 35% Fund B ($100M) 3% 4% 5%