A financial institution that finances its investments through borrowing is said to engage in ________.

Question

Quizplus · Accepted Answer

When a financial institution finances its investments through borrowing, it is said to engage in leverage. Leverage involves using borrowed funds to increase the potential return on investments. This can increase the profits of the institution but also increases the risk as there is a cost to borrowing the funds.

A Financial Institution That Finances Its Investments Through Borrowing Is