(Last Word) Leverage in the ﬁnancial system
A) magniﬁes proﬁts but reduces losses.
B) magniﬁes both proﬁts and losses.
C) reduces proﬁts but magniﬁes losses.
D) reduces both proﬁts and losses.

Question

Quizplus · Accepted Answer

Leverage amplifies the potential gains but also the potential losses, so it magnifies both profits and losses. The use of leverage can increase returns on investments but also increases the risk of losses.

(Last Word) Leverage in the ﬁNancial System