To employ leverage,you should borrow funds to make an investment with the goal of earning a rate of return in excess of the after-tax costs of borrowing.

Question

Quizplus · Accepted Answer

Leverage involves borrowing funds to amplify the potential return on an investment, but it also increases the potential risk. The goal is typically to earn a rate of return that is higher than the after-tax cost of borrowing, so that the investor can pay off the loan and keep the profit.

To Employ Leverage,you Should Borrow Funds to Make an Investment