Suppose that you are starting a new venture capital fund. You raised $200 million in committed capital. You will charge a management fee of 2.5 percent per year for the first five years, with a reduction of 25 basis points each year thereafter. Assume that all fees are paid on committed capital, and that your fund has a 10-year life.
a. What are the total amount of fees for your fund?
b. What is percent of the committed capital is paid as fees?