Question

Suppose money invested in a hedge fund earns 1% per trading day. There are 250 trading days per year. With an initial
investment of $100, what will be your annual return assuming the manager puts all of your daily earnings into a zero-
interest-bearing checking account and pays you everything earned at the end of the year?

Answer 1

Given :- Suppose money invested in a hedge fund earns 1% per trading day. There are 250 trading days per year. With an initial investment of $100, what will be your annual return assuming the manager puts all of your daily earnings into a zero- interest-bearing checking account and pays you everything earned at the end of the year ?

Answer :-

since , daily earning puts into zero- interest-bearing , we didnt get any interest on daily earning .

now,

→ initial investment = $100 .

→ Earing per trading day = 1% of $100 = (1 * 100)/100 = $1 .

and,

→ Total total trading days = 250 .

so,

→ Total earing on trading days = 250 * 1 = $250 .

then,

→ Return after one year = initial investment + Total earing on trading days = $100 + $250 = $350 (Ans.)

Note :- If the manager allows us to reinvest the earning we have to find intrest on total earning .

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