Asked by Aubrey Hadley on Jun 12, 2024
Verified
The use of personal borrowing to change the overall amount of financial leverage to which the individual is exposed is called:
A) Homemade leverage.
B) Dividend recapture.
C) The weighted average cost of capital.
D) Private debt placement.
E) A privileged subscription offer.
Homemade Leverage
A strategy whereby investors adjust the financial leverage of their investment by borrowing or lending money on their own, rather than relying on the leverage inherent in their investments.
Financial Leverage
The use of borrowed funds (debt) to amplify the potential return on investment.
Personal Borrowing
Personal borrowing involves an individual obtaining funds from a lender (such as a bank or financial institution) for personal use, which could range from purchasing a home to funding education.
- Comprehend the idea of self-created leverage and its real-world applications for private investors.
Verified Answer
MK
Meenalni KeshavJun 13, 2024
Final Answer :
A
Explanation :
Homemade leverage refers to the process where individuals adjust their exposure to financial leverage through personal borrowing or lending, essentially altering their financial risk and return profile without relying on corporate-level financial strategies.
Learning Objectives
- Comprehend the idea of self-created leverage and its real-world applications for private investors.