PM has $1m LT equity with return 10%& hedge that postion with ST swap index lost 9%. What is net return %?

Question

Basically the PM invested only $1M & took a swap position on it. So, what will be the formula for caclulating the return on this situation? Is it (100,000-90,000)/1,000,000 or (100,000-90,000)/2,000,000. Shall the denominator be $1 M invested in the LT position or $2 M for the LT plus the ST swap poition??

Answer 1

6%