Which one of the following is an example of homemade leverage?
A) An investor borrows money to invest in a car.
B) An investor sells part of her stocks to put down a down payment.
C) An investor borrows money to invest more in a company that she owns.
D) An investor invests in the derivatives of a firm.

Question

Quizplus · Accepted Answer

Homemade leverage refers to an individual investor using their own borrowing or investing strategies to increase their exposure to a particular investment. Option C is the only example where the investor is using borrowed funds to invest more in a company they already own, thereby increasing the potential return on investment through homemade leverage. Options A, B, and D do not involve the investor using their own borrowing or investing strategies.

Which One of the Following Is an Example of Homemade