Question

An investor has $50,000 in cash to put a $5,000 down payment on 10 different homes valued at $50,000 each and will finance the rest of the investment. Soon after buying the homes she sold all 10 homes for $60,000 each and earned a profit of $100,000 - an astounding 100% return on investment. This scenario is an example of:_________

a. risk-return
b. interest rate spread
c. financial liquidity
d. leverage

Answer 1

Answer:

d. leverage

Explanation:

Leverage -

It is a type of investment strategy , where the borrowed money is used .

It is the method by which the firm or an organisation is expanded by using the borrowed money as the capital and funding , is referred to as leverage  .

Hence , from the given scenario of the question,

The person uses borrowed money to increase the potential return of an investment .

Hence , from the question,

The correct term is leverage .