35 basis points on $2.4 billion

Question

A fund charges a management fee of 35 basis points on \2.4 billion of assets. Solve in your head. What is the annual fee in dollars? Aim: under 10 seconds.

Accepted Answer

One basis point is 0.01\% = 10^{-4}. So on \2.4B: 1 	ext{ bp} = 2.4 	imes 10^9 	imes 10^{-4} = \240{,}000. Then scale: 35 	ext{ bp} = 35 	imes 240{,}000 = \8{,}400{,}000. Mental step for 35 	imes 24: 35 	imes 24 = 35 	imes 4 	imes 6 = 140 	imes 6 = 840. Takeaway. Always compute "1 bp of the notional" first, it's just the notional shifted four decimal places, then multiply by the bp count. Anchors worth caching: 1 bp of \1M is \100; 1 bp of \1B is \100k.

35 basis points on $2.4 billion

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