An investor allocates $10 million at the beginning of the year to a hedge fund charging a management fee of 2% and an incentive fee of 20% with a 6%(hard) hurdle rate. At year end the value of the investment is $11.8 million. The incentive fee is calculated net of the management fee and the management fee is based on the yearend value. The net of fees return the investor earned is closest to:
I chose A, and the answer explanation gave 13.24% as the answer when they walked through how to calculate it. Am I correct and this is just an error on their end?