Textbook Solution: https://www.chegg.com/homework-help/referring-collapse-long-term-capital-management-hedge-fund-1-chapter-11.1-problem-6pa-solution-9780133148688-exc

In referring to the collapse of the Long-Term Capital Management hedge fund in 1998, an article in the New York Times noted that:

Starting with just $5 billion in capital, the fund was able to get $125 billion in additional funds. Using the leverage, it took on trading positions with an estimated potential value of $1.25 trillion.

What is leverage? What information from this excerpt indicates that Long-Term Capital Management was highly leveraged?

What risks did Long-Term Capital Managements high leverage pose to the firm? What risks did it pose to the financial system?