John Dayton is the manager of a single-strategy hedge fund. The fund's historical annual ROA is 6%
Fantastic news! We've Found the answer you've been seeking!
Question:
John Dayton is the manager of a single-strategy hedge fund. The fund's historical annual ROA is 6% and its ROE is 18%. However, Dayton forecasts that changing market conditions will cause its ROA in the next year to decline to 3.5%. Assuming an intense rate of 3%, what level of leverage should Dayton employ in order to maintain an ROE of 18?
a. 5 to 1.
b. 9 to 1.
c. 30 to 1.
d. 36 to 1.
Expert Answer:
Posted Date:
