Allison and Bill are both mutual fund managers, although Allison is more skilled than Bill. Both have $200 million in assets under management and charge a fee of 1%/year. Allison is able to generate a 2% alpha before fees and Bill is able to generate a 1% alpha before fees. a. What is the alpha investors earn in each fund (that is, the alpha after fees are taken out)? b. Which fund will experience an inflow of funds? c. Assume that both managers have exhausted the supply of good investment opportunities and so they will choose to invest any new funds received in the market portfolio and so those funds will earn a zero alpha. How much new capital will flow into each fund? d. Once the new capital has stopped flowing in, what is the alpha before and after fees of each fund? Which fund will be larger? e. Calculate each manager's compensation once the capital has stopped flowing. Which manager has higher compensation? a. What is the alpha investors earn in each fund (that is, the alpha after fees are taken out)? (Select the best choice below.) O A. Bill's investors earn 1%. Allison's investors earn 0%. O B. Bill's investors earn 0%. Allison's investors earn 1%. O C. Bill's investors earn 0%. Allison's investors earn 0%. OD. Bill's investors earn 1%. Allison's investors earn 1%. b. Which fund will experience an inflow of funds? (Select the best choice below.) O A. Because investors in Allison's fund earn a negative alpha, it will experience an inflow of funds. O B. Because investors in Bill's fund earn a negative alpha, it will experience an inflow of funds. O C. Because investors in Allison's fund earn a positive alpha, it will experience an inflow of funds. O D. Because investors in Bill's fund earn a positive alpha, it will experience an inflow of funds. c. Assume that both managers have exhausted the supply of good investment opportunities and so they will choose to invest any new funds received in the market portfolio and so those funds will earn a zero alpha. How much new capital will flow into each fund? (Select the best choice below.) O A. No capital will flow into Allison's fund. Capital will flow into Bill's fund until investors earn a negative alpha. O B. No capital will flow into Allison's fund. Capital will flow into Bill's fund until investors earn a zero alpha. O C. No capital will flow into Bill's fund. Capital will flow into Allison's fund until investors earn a zero alpha. OD. No capital will flow into Bill's fund. Capital will flow into Allison's fund until investors earn a negative alpha The total amount of new capital is 5 million. (Round to the nearest integer.) d. Once the new funds have stopped flowing, what is the alpha before and after fees of each fund? Which fund will be larger? (Select the best choice below.) O A. Since no new capital flowed into Bill's fund, Bill's before and after fee alpha remains the same. For Allison the alpha after fees is negative. OB. Since no new capital flowed into Bill's fund, Bill's before and after fee alpha remains the same. For Allison the alpha after fees is zero. O C. Since no new capital flowed into Allison's fund, Allison's before and after fee alpha remains the same. For Bill the alpha after fees is negative. O D. Since no new capital flowed into Allison's fund, Allison's before and after fee alpha remains the same. For Bill the alpha after fees is zero. e. Calculate each manager's compensation once the capital has stopped flowing. Which manager has higher compensation? (Select the best choice below.) O A. Bill's compensation is $200 million x 1% = $2 million/year. Allison's compensation is $400 million x 1% = $4 million/year. So Allison, the higher skilled manager, is paid more. O B. Bill's compensation is $200 million x 1% = $2 million/year. Allison's compensation is $400 million x 1% = $4 million/year. So Bill, the higher skilled manager, is paid more. O C. Allison's compensation is $200 million x 1% = $2 million/year. Bill's compensation is $400 million x 1% = $4 million/year. So Allison, the higher skilled manager, is paid more. O D. Allison's compensation is $200 million x 1% = $2 million/year. Bill's compensation is $400 million x 1% = $4 million/year. So Bill, the higher skilled manager, is paid more