"Leverage" in ﬁnance refers to the
A) increase in proﬁts or losses from an investment.
B) use of one's own money in an investment.
C) use of borrowing money in order to magnify returns from an investment.
D) shifting of ﬁnancial risk onto an insurer.

Question

Quizplus · Accepted Answer

Leverage in finance refers to the use of borrowed money (debt) to potentially increase returns on an investment. This can magnify gains but also magnify losses, as the investor not only has to pay back the amount borrowed but also the interest. Therefore, option C is the correct answer as it directly refers to the use of borrowed money to enhance investment returns.

"Leverage" in ﬁNance Refers to the