6. Hedge funds and financial leverage Compared to mutual funds, hedge funds usually require much Initial investments. Suppose that Thompson Hedge Fund obtains and invests $3 of unds for every $1 of equity Invested. In other words, it can Invest $4 of assets for each $1 of equity. Also suppose that Thompson cand larger 10% return on assets (ROA). Given this BOA, the return on Thorreron's equity investment is smaller Suppose that Thompson Hedge Fund obtains and invests $3 of borrowed funds for every $1 of equity invested. In other words, it can invest 54 of assets for each $1 of equity. However, suppose that Thompson suffers a 10% loss, or a 10% return on assets (ROA). Given this ROA, the retum on Thompson's equity investment is Compared to mutual funds, hedge funds usually require much Initial investments. Suppose that Thompson Hedge Fund obtains and invests $3 of borrowed funds for every $1 of equity invested. In other words, it can invest $4 of assets for each $1 of equity. Also suppose that Thompson can achieve a 10% return on assets (ROA), Given this ROA, the return on Thompson's equity investment is %. Suppose that Thompson Hedge Fund obtains and invests $3 of borrowed funds for every $1 of equity invested. In other words, it can invest $4 of assets for each $1 of equity. However, suppose that Thompson suffers a 10% loss, or a -10% return on assets (ROA). Given this ROA, the return on Thompson's equity investment is