The use of borrowed funds to supplement existing funds for purposes of investment is called:
A) arbitrage.
B) leverage.
C) convergence.
D) intermediation.

Question

Quizplus · Accepted Answer

The use of borrowed funds to increase the potential return on invested capital is known as leverage. This can be risky as it also increases the potential losses. Arbitrage refers to the practice of taking advantage of price differences between markets, convergence is the merging of different ideas or processes, and intermediation is the process of intermediaries making it easier for parties to conduct transactions.

The Use of Borrowed Funds to Supplement Existing Funds for Purposes