Use of leverage will increase the rate of return on a capital gain and also will increase the rate of loss on a capital loss.

Question

Quizplus · Accepted Answer

This statement is true. Leverage amplifies the potential gains as well as potential losses. So, if you use leverage to invest in a highly profitable market, you could make significantly higher profits. Similarly, if the market experiences a downturn, the losses you incur could be much larger.

Use of Leverage Will Increase the Rate of Return on a Capital