What is the risk to capital for Manish's segregated fund investment of $120,000 with a 75% maturity guarantee?

To calculate the risk to capital for Manish's segregated fund investment, it's important to understand what a maturity guarantee entails. A maturity guarantee ensures that the investor will receive a certain percentage of their initial investment back, regardless of market conditions when the investment matures.

In this case, Manish has invested $120,000, and he has a 75% maturity guarantee. This means that when the investment matures, he is guaranteed to receive at least 75% of his investment back. To determine the guaranteed amount, you would calculate 75% of $120,000:

75% of $120,000 = 0.75 * 120,000 = $90,000.

This implies that if the market value of the investment drops, Manish is assured that he will not receive less than $90,000 at maturity, no matter how poorly the fund performs.

The risk to capital can be understood as the amount that could potentially be lost if the investment performs very poorly. In this case, the capital at risk is the difference between the initial investment and the guaranteed amount:

Risk to capital = Initial Investment - Guaranteed Amount

Risk to capital = $120,000 - $90,000

Risk to capital =