May I please ask for help on this one? I’m taking the exam on Thursday:
Question 84
At a time when a hedge fund’s NAV is 20% below its high water mark, an investor is considering redeeming shares in the fund, and investing the proceeds in another hedge fund that has a performance fee of 10%. Assume that both funds have no management fees, and the old fund is projected to earn 10% per year. Which of the following is closest to the break-even rate of return in the next year for the new fund, relative to continuing to invest in the previous hedge fund?
A.9.09%
B.10.00%
C.11.11%
D.20.00%
Your answer:** B
Correct answer:C
Can you please share the solution? Thank you