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You manage a portfolio with $5 billion in assets. You entered into a total return swap agreement with an investment bank for a basket of
You manage a portfolio with $5 billion in assets. You entered into a total return swap agreement with an investment bank for a basket of $20 billion worth of stocks for the cost of 1% a month. What is your leverage ratio? If the basket of stocks is worth $22 billion at the end of one year, would you make any money? If the basket of stock is worth $16 billion at the end of the year, what is your percentage of losses?
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