Which of the following statements is true?
A) Leverage increases expected return while lowering risk.
B) Leverage increases risk.
C) Leverage lowers the expected return and lowers risk.
D) Leverage lowers the expected return and increases risk.

Question

Quizplus · Accepted Answer

Leverage increases the risk of an investment because it involves borrowing money to invest, which means that any losses are amplified. While it may also increase expected return, it comes at a higher level of risk. Therefore, statement B is true.

Which of the Following Statements Is True