Suppose a hedge fund manager earns 1% per trading day. There are 250 trading days

per year. Answer the following questions:

(a) What will be your annual return on $100 invested in her fund if she allows you to

reinvest in her fund the 1% you earn each day?

(b) What will be your annual return assuming she puts all of your daily earnings into

a zero-interest- bearing checking account and pays you everything earned at the end

of the year?

(c) Can you summarize when it is proper to "annualize" using APR (annual percentage

rate) versus EAR (effective annual rate)?