Copyright © 2011 Pearson Prentice Hall. All rights reserved. 14-42 Homemade Leverage (cont'd) If the cash flows of the unlevered equity serve as colla
{"Image DocumentName": "Homemade Leverage (cont d)", "Image ImageDescription": "If the cash flows of the unlevered equity serve as collateral for the margin loan (at the risk-free rate of 5%), then by using homemade leverage, the investor has replicated the payoffs to the levered equity, as illustrated in the previous slide, for a cost of  500. By the Law of One Price, the value of levered equity must also be  500.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}