Question: Question 8 (2.5 points) A hedge fund leverages its $100 million of investor capital by a factor of four (borrows $300 million) and invests it

Question 8 (2.5 points) A hedge fund leverages its $100 million

Question 8 (2.5 points) A hedge fund leverages its $100 million of investor capital by a factor of four (borrows $300 million) and invests it into a portfolio of junk bonds yielding 12%. If its borrowing costs are 9%, what is the yield on investor capital? 1) 14% 2) 18% 3) 26% 4) 21%

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