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Leverage (finance): Quiz


Question 1: Correlation leverage is a third concept that captures the degree to which the variability in the firm's value is ________ with the variability of the universe of all risky assets.
VarianceCorrelation and dependenceNormal distributionPearson product-moment correlation coefficient

Question 2: One of its forms, associated to the ________, was the practice of financing homes with no or little down payment, playing on the hope that the price of the assets (the property in this case) will rise.
United States housing market correctionSubprime crisis impact timelineSubprime mortgage crisisRegulatory responses to the subprime crisis

Question 3: This increased ________ may still lead to the optimal outcome for the entity or person making the investment.
Financial riskRisk managementUncertaintyRisk

Question 4: Margin buying is a common way of utilizing the concept of leverage in ________.
Capital accumulationInvestmentBond (finance)Stock

Question 5: This debt to equity ratio's influence on the value of a firm is described in the ________.
StockDebt-to-equity ratioCapital structureModigliani-Miller theorem

Question 6: [1] In ________, a key measure of leverage is the debt to GDP ratio.
Heterodox economicsMoneyMacroeconomicsMicroeconomics

Question 7: investment banks, which borrowed funds to invest in ________, increasing their leverage between 2003-2007 (see diagram).
Sovereign bondMortgage-backed securityAuction rate securityEmerging market debt

Question 8: Negative gearing is a form of financial leverage where an investor borrows money to buy an ________, but the income generated by that asset does not cover the interest on the loan.
Cash flow statementBalance sheetValuation (finance)Asset

Question 9: An unlevered firm can be seen as an all-equity firm, whereas a levered firm is made up of ownership equity and ________.
Credit (finance)DebtBond (finance)Consumer debt

Question 10: In finance, leverage (also known as gearing or levering) refers to the use of ________ to supplement investment.
DebtBond (finance)Consumer debtCredit (finance)


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