The Use of Leverage

question 59

Multiple Choice

The use of leverage:

• A)increases both the asset and the equity betas.
• B)decreases both the asset and the equity betas.
• C)decreases the equity beta and increases the asset beta.
• D)increases the equity beta but does not affect the asset beta.
• E)decreases the equity beta but does not affect the asset beta.

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Definitions:

Attachment

The point at which a creditor becomes the secured party that has a security interest in the collateral.

Secured Party

A lender or creditor who has an interest, typically a lien, in the collateral offered by the debtor in a secured transaction.

Collateral

Assets that a borrower offers to a lender to secure a loan, which the lender may seize in the event of loan default.

Intangibles

Assets that lack physical form but have value, such as intellectual property or goodwill.