Two years ago, you invested $750,000 with a market-neutral hedge fund manager. The fee structure is 2/20, and the fund has a high-water mark provision.
Suppose the first year the fund manager lost 10 percent, and the second year she gained 20 percent.
Assume management fees are paid at the beginning of each year and performance fees are paid at the end of each year. Under the terms of the high-water mark provision:

a. What are the management and performance fees paid in Year 1?

b. What are the management and performance fees paid in Year 2?