When the Internal Rate of Return on an Investment Increases

question 3

True/False

When the internal rate of return on an investment increases as the loan-to-value ratio increases,positive leverage exists.

---

Definitions:

Income Effect

The modification of income for people or economies and how this adjustment affects their purchasing desires for goods or services.

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, typically because consumers can afford better alternatives.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one good for another more or less expensive good.

Income Effect

The change in an individual's or an economy's consumption resulting from a change in real income.