Financial leverage: multiple choice arises because most borrowed funds have a fixed interest rate. is a concept that does not apply to individuals. arises because most borrowed funds have a variable interest rate. usually has no bearing on the risk associated with a company.

The correct answer is: arises because most borrowed funds have a fixed interest rate.

Explanation:

Financial leverage is to use some mechanism (such as debt) to increase the amount of money we can allocate to an investment. It is the relationship between own capital and that actually used in a financial operation.

The main mechanism to leverage is debt. The debt allows us to invest more money than we have thanks to what we have borrowed. In return, of course, we must pay some interest, but not only through debt can financial leverage be achieved.

In many financial instruments (especially derivatives such as futures or CFDs) it is only necessary to leave a guarantee of the total invested, so that the operation can also be leveraged. In addition, in financial options, since we buy a right on an underlying asset, which generally has a much higher price than the premium, a leverage effect is generated.

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