Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Compared to mutual funds, hedge funds are usually subject to  [MORE/LESS?] regulation.

Suppose that Thompson Hedge Fund obtains and invests $3 of borrowed funds for every $1 of equity invested. In other words, it can invest $4 of assets for each $1 of equity. Also suppose that Thompson can achieve a 10% return on assets (ROA).

Given this ROA, the return on Thompson’s equity investment is [?]%.

Suppose that Thompson Hedge Fund obtains and invests $3 of borrowed funds for every $1 of equity invested. In other words, it can invest $4 of assets for each $1 of equity. However, suppose that Thompson suffers a 10% loss, or a -10% return on assets (ROA).

Given this ROA, the return on Thompson’s equity investment is [?]%.

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