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

The fact that individual investors can alter the amount of financial leverage to which they are exposed is referred to as homemade leverage. This is the concept that investors can achieve the desired level of leverage by adjusting their own portfolio composition, rather than relying solely on the company's capital structure decisions.

The Fact That Individual Investors Can Alter the Amount of ﬁNancial