The fact that individual investors can alter the amount of financial leverage to which they are exposed is referred to as:
A) Capital structure targeting.
B) Adjusting the business risk.
C) The static theory of capital structure.
D) Homemade leverage.
E) M&M Proposition II.

Question

Quizplus · Accepted Answer

Homemade leverage refers to the process by which investors adjust the leverage (or the amount of debt vs. equity) in their own investment portfolios, essentially allowing them to alter their exposure to financial risk to match their personal risk preferences. This concept is in contrast to relying solely on the capital structure decisions made by the firms in which they invest.

The Fact That Individual Investors Can Alter the Amount of Financial