When investors use leverage in their own portfolios to adjust the leverage choice made by the firm, it is referred to as ________.
A) outside debt
B) retained earnings
C) homemade leverage
D) payout ratio

Question

Quizplus · Accepted Answer

Homemade leverage is the strategy where an investor adjusts the level of leverage of their own portfolio to achieve their preferred level of risk and leverage, instead of relying solely on the firm's leverage decision. This allows investors to customize their portfolio's leverage to their individual risk preferences and investment goals. Therefore, option C, homemade leverage, is the correct answer. The other options are not relevant to the concept of homemade leverage.

When Investors Use Leverage in Their Own Portfolios to Adjust