I found the wording confusing. They say portfolio of 100m euros and then in the table the Assets are 200m euros… So I was trying to do 300*6-100*1, but just wasn’t able to reconcile this in my head while taking the test And then immediately in the following qn, it says they don’t consider leverage, but they used 200m as the portfolio size rather than 100… Any hints pls so I don’t make similar mistakes in the exam? Tks for your time
Bump… Pls help
First sentence says they are selecting a manager to manage a 100M portoflio. Further down, “Delta indicates that by using 100% leverage…”
If you start with 100 and use 100% leverage you’re portfolio now has total assets of 200M, 100M equity and 100M liabilities.
Thanks… So if they say Assets, it always includes the leverage but as well? Why is it that in the following qn they have considered total assets including leverage when the qn says they are not considering leverage?
Assets is the total market value of the portfolio so it includes the assets you bought with leverage. Just remember the basic accounting formula A = L + E
Thanks but in qn 38 it clearly states “and assuming no leverage is used”… Why should we still consider the 100m leverage?
I am confused about that too. Can someone clarify that no leverage meaning 100MM and not 200 as they have used?