Diane Chambers Buys an Apartment Building for $2 Million

question 108

Multiple Choice

Diane Chambers buys an apartment building for $2 million.Which one of the following demonstrates the highest degree of financial leverage?

• A)$500,000 down payment and mortgage of $1,500,000
• B)$250,000 down payment and loan of $1,750,000
• C)$150,000 down payment and loan of $1,850,000
• D)$100,000 down payment and loan of $1,900,000
• E)$1 million down payment and loan of $1 million

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Definitions:

Cash Flow

The entire sum of funds moving in and out of a corporation, impacting its ability to meet short-term obligations.

Subscale

A specific subset of items within a larger scale, designed to measure a particular dimension of the main construct.

Reliability

The degree to which an assessment tool produces stable and consistent results over time.

Validity

The extent to which a test, tool, or study accurately measures or reflects what it claims to measure.