Positive Financial Leverage Occurs When

question 23

Multiple Choice

Positive financial leverage occurs when:

• A) the asset is finance with all equity
• B) the cost of borrowing exceeds the return on the investment
• C) the cost of the debt is less than the return on the investment
• D) there is a decline in the return on equity

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Definitions:

Volatility Value

A statistical measure of the dispersion of returns for a given security or market index, often used to quantify risk.

Time Value

The idea that money in hand today is valued higher than an identical sum in the future because of its ability to generate earnings.