Mock exam 2010, Q 49

Hi all, This answer of 8.66% does not seem to be right… The formula in the book is different from the answer sheet… anyone else observe this or i am dreaming

i believe i got 8.66 as well. what is the question again?

no, its okay… i got the answer from one of the oldposts… The issue was that i am assuming a 40% leverage among an investable fund of %100… accoring the question, it is 40% leverage on top of the 100 dollars which is the equity…

Leverage = 40% = 40% Debt for 100% Equity Interest (Borrowed Money - Repo) = 4.25% Interest (Invested Funds) R(Portfolio) = 7.40 + (0.4)*(7.40-4.25) R(Portfolio) = 8.66%