Which of the Following Statements Is Correct

question 85

Multiple Choice

Which of the following statements is correct?

• A) Leverage reduces the risk of equity even when there is no risk that the firm will default.
• B) Leverage increases the risk of debt even when there is no risk that the firm will default.
• C) Leverage increases the risk of equity even when there is no risk that the firm will default.
• D) Leverage reduces the risk of debt even when there is no risk that the firm will default.

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Definitions:

Defense Mechanism

Psychological strategies used by individuals to cope with reality and maintain self-image by unconsciously denying or distorting reality.

Unconscious Impulses

Desires or feelings that a person is not aware of but that influence behaviors and decisions.

Karen Horney

A psychoanalyst known for her theories on neurosis, personality development, and the concept of basic anxiety.

Neo-Freudian

Pertaining to the theorists and psychologists who accepted the broad outlines of Freud's theory but modified and expanded upon it in various ways.