Which of the following statements regarding leverage is FALSE?
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A leverage-based strategy increases, not decreases portfolio returns when the return on the strategy is greater than the cost of borrowed funds.
A leverage-based strategy increases, not decreases portfolio returns when the return on the strategy is greater than the cost of borrowed funds.
Which of the following best characterizes leveraging? Leveraging involves:
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Leverage refers to the use of borrowed funds to purchase a portion of the securities in a portfolio. A leverage-based strategy is used with the objective of earning a return over and above the cost of borrowed funds.
Which of the following is an advantage of leverage? Leverage:
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Leveraging increases the return potential but also increases the risk, resulting in a wider range of possible outcomes.
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