6. Hedge funds and financial leverage Campared to mutual funds, hedge funds are open," in terms of allowing investors to make withdrawals. Suppose that Thompson Hedge Fund obtains and invests $2.50 of borrowed funds for every $1 of equity invested. In other words, it can invest $3.50 of assets for each $1 of equity. Also suppose that Thompson can achieve a 20% return on assets (ROA). Given this ROA, the return on Thompson's equity investment is %. Suppose that Thompson Hedge Fund obtains and invests $2.50 of borrowed funds for every $1 of equity invested. In other words, it can Invest $3.50 of assets for each $1 of equity. However, suppose that Thompson suffers a 20% loss, or a -20% return on assets (ROA). Given this ROA, the return on Thompson's equity Investment is % funds, hedge funds are w "open," in terms of allowing son Hedge Fund obtains more sts $2.50 of borrowed func of equity. Also suppose f less mpson can achieve a 20% return on Thompson's equity investment is %. son Hedno