Suppose you are an active fund manager with a limited capacity to generate alpha of 2.5 million/year. You charge a fee of 0.5% per year. Currently, your portfolio has AUM of 150 million. a. How much alpha is earned by you as fees? How much is left over for your investors?

b. Investors saw you had good performance and you got inflows of 200 million, how much alpha is earned by you as fees? How much is left over for your investors? c. What should be your AUM when there is no alpha left for your investors?