When investors take a short position in one asset to invest more in another asset,they are using:

Question

Quizplus · Accepted Answer

This scenario is describing the use of financial leverage, which involves borrowing or using other forms of debt to increase an investor's potential returns. In this case, the investor is taking a short position (which involves borrowing shares to sell in anticipation of a price drop) in order to free up capital to invest in another asset. This strategy increases the investor's exposure to the second asset and is a form of financial leverage. Capital budgeting refers to the process of deciding which long-term investments to pursue based on their potential returns, while corporate leverage refers to a company's use of debt to finance its operations. Neither of these concepts accurately describes the situation described in the question.

When Investors Take a Short Position in One Asset to Invest