Problem 26-17 Here are data on three hedge funds. Each fund charges its investors an incentive fee of 20% of total returns. Suppose initially that a fund of funds (FF) manager buys equal amounts of each of these funds, and also charges its investors a 20% incentive fee. For simplicity, assume also that management fees other than incentive fees are zero for all funds. Book Start of year value (millions) Print Hedge Fund 1 $200 20% Hedge Fund 2. $ 200 30% Hedge Fund 3 $200 50% Gross portfolio rate of return a. Compute the rate of return after incentive fees to an investor in the fund of funds. (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Rate of return b. Suppose that instead of buying shares in each of the three hedge funds, a stand-alone (SA) hedge fund purchases the same portfolio as the three underlying funds. The total value and composition of the SA fund is therefore identical to the one that would result from aggregating the three hedge funds. Consider an investor in the SA fund. After paying 20% incentive fees, what would be the value of the investor's portfolio at the end of the year? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Percentage return ook b. Suppose that instead of buying shares in each of the three hedge funds, a stand-alone (SA) hedge fund purchases the same portfolio as the three underlying funds. The total value and composition of the SA fund is therefore identical to the one that would result from aggregating the three hedge funds. Consider an investor in the SA fund. After paying 20% Incentive fees, what would be the value of the Investor's portfolio at the end of the year? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Percentage return Print d. Now suppose that the return on the portfolio held by hedge fund 3 were -50% rather than +50%. Recalculate your answers to parts (a) and (b). (Do not round your intermediate calculations. Negative amount should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.) Fund of fund return Stand-alone fund return