Question: To determine if positive leverage exists, you should compare the following: A. The capitalization rate and the mortgage constant B. The cost of funds and

To determine if positive leverage exists, you should compare the following:

A. The capitalization rate and the mortgage constant

B. The cost of funds and the unleveraged yield

C. The unleveraged yield and the leveraged yield

D. Both b and c

The unleveraged, before-tax internal rate of return of a property is 12 percent. With a specific mortgage loan on this property, the before-tax equity yield is 12 percent. This reflects:

A . Negative leverage from the loan

B. Positive leverage from the loan

C. Neutral leverage from the loan

D. None of the above.

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