Question

John Galt is a mutual fund manager at Atlas Asset Management. He can generate capital. After that amount his skills are spread too thin,, so he cannot add value and his alpha is zero for all investments over $500 million. Atlas Asset Management charges a fee of 0.80% on the total amount of money under management. Assume that there are always investors looking for positive alpha investments and no investor would invest in a fund with a negative alpha. Assume that the fund is in equilibrium, meaning that no investor either takes out money or wishes to invest new money into the fund. alpha of 2% a year up to $500 million of invested an The amount of fee income that Galt's fund will generate is closest to: $10.00 million $25.00 million $3.75 million $8.00 million

Answer 1

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PE EPS, STOCK DIVIDEND-Microsoft Excel File Home Insert Page Layout Formulas Data Review View Add-Ins - Cut AutoSum A A Wrap Text Calibri 11 General Fill Copy A- Merge & Center Conditional Format Insert Delete Format Paste BIU S % Cell Sort & Find & 2 Clear Format Painter Formatting er Select ble Styles Clipboard Font Alignment Number Shules Cells Editing CO33 CQ CU CO CP CR CT CV CW CX 16 17 JOHN GALT 18 19 2.00% ALPHA 20 21 AT EQUILIBRIUM, THE ALPHA WILL TO BE ZERO sO INVESTORS EXPECT TO RECEIVE ZERO ALPHA 22 23 24 AT EQUILIBRIUM ALPHA WILL BE ZERO 0 2(500)(-2) (X) 25 26 X 500 MILLION sO TOTAL FUNDS WILL BE (500+500) = 1000 MILLION UNDER MANAGEMENT 27 28 FEES 1000 MILLION X 0.8% : 8 MILLION 29 ANSWER 30 31 32 33 34 35 EV PE EPS DIVABNORMALdeberk MARGIN MONEY EVA MVA LEVERAGED BUYSWA 120 % STOCK DIV NAV HEDGE FUND MF PB ROPI marginal tax APV ROSS price quote Re erences 13:05 C | 4 m 4* ENG 03-06-2019