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A mutual fund had $100 million under its management at the beginning of year 1,...

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Finance

A mutual fund had $100 million under its management at the beginning of year 1, the fund is subject to a high mark of $100 million; the manager will receive an incentive fee for her services of 10% based on the fund's total assets under management. If the fund returns were -12% in year 1 and 8% in year 2, what will be the incentive fees at the end of year 2 for the manager if no contributions or disbursements were made during that time?

No incentive fees

$10 million

$704,000

$1 million

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