MONIE Orchards - Personal Financial Planning
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Term
Explanation
Further links
Notes
1
Leverage
Leverage is the borrowing of money to fund your investments, in the hope that your investment return will be higher than your loan interest. The most common example is borrowing money to purchase your house. Example: Purchase a house of 100,000, with a loan of 90,000, interest rate of 6% using 10,000 of capital. If the house increases in value by 10%, it will be worth 110,000, and your capital would be 20,000, an increase of 100%. If the house decreases in value by 10%, your capital will be wiped out.
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