Question: BM Question 12: A mutual fund is established with S50m assets in place, with 50m investment units each valued at $1. It borrows another 530m

BM Question 12: A mutual fund is established with S50m assets in place, with 50m investment units each valued at $1. It borrows another 530m from a bank, and invest these funds in Australian stocks. Ignoring the interest on the loan: a) what would be the NAV of each investment unit if Australian stocks increase in value by: 55% b) what would be the NAV of each investment unit if Australian stocks decrease in value by: 40% c) What conclusion can you make about the effect of leverage on returns (in less than 50 words)? WiseBook Pro 6 6 7 8 9 I T E U 0 Y H E 1 . J o K. L n

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