Question

John has the opportunity to invest in a

property with a 9% return. He can borrow
the money at an interest rate of 7%.
Which investment characteristic exists?
a. Liquidity
b. Negative leverage
c. Neutral leverage
d. Positive leverage

Answer 1

The investment characteristic that exists in this scenario is positive leverage.

Step-by-step explanation:

The investment characteristic that exists in this scenario is positive leverage.

Leverage refers to using borrowed money to finance an investment. In this case, John has the opportunity to invest in a property with a 9% return but can borrow the money at an interest rate of 7%. By borrowing the money at a lower rate than the return on the investment, John can make a profit from the positive leverage.