If a Firm Earns 10% Return on Funds They Borrowed

question 192

True/False

If a firm earns 10% return on funds they borrowed at 15% interest, the owners of the firm realize a benefit from using leverage.

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Definitions:

Projection

A defense mechanism in psychology where an individual attributes their own unacceptable thoughts, feelings, or motives to another person.

Defense Mechanism

Psychological strategies brought into play by individuals, groups, or even nations to cope with reality and to maintain self-image.

Distorts Reality

A cognitive bias or psychological state where an individual's perception of reality is significantly altered from the actual state of the world.

Complex

In psychology, a related group of emotionally significant ideas that are completely or partly repressed and cause psychic conflict leading to abnormal mental states or behavior.