Which of the following investment strategies involves generating a higher expected rate of return through increasing risk?
A) Diversifying
B) Hedging risk
C) Leverage
D) Value at risk

Question

Quizplus · Accepted Answer

Leverage involves taking on additional risk in order to potentially generate a higher return. This can be done by borrowing money or using other financial instruments to amplify potential gains. Diversifying and hedging risk, on the other hand, aim to reduce risk rather than increase potential returns. Value at risk is a risk management technique that calculates the maximum potential loss in a portfolio at a given level of confidence, but it does not involve actively seeking higher returns through increased risk.

Which of the Following Investment Strategies Involves Generating a Higher