You have made a $500,000 investment in a hedge fund that has a 2/20 fee structure. The fund has a total of $25 million of assets under management and provides a return of 15% in the first year. Assume that management fees are paid at the beginning of each year and performance fees are paid at the end of each year in which they are applicable. How much will you pay in management and performance fees for the year?

Multiple Choice

• $1,000; $11,250

• $1,000; $12,700

• $10,000; $11,250

• $10,000; $12,700

• $10,000; $15,000