The correct answer is: A. Rate of Interest < Rate of Return
Trading on equity is a financial strategy that involves using borrowed money to finance the purchase of assets. This can be a risky strategy, but it can also be very profitable if the assets appreciate in value. The benefit of trading on equity is that it allows investors to leverage their investment, which means that they can make a larger return on their investment with a smaller amount of money.
However, there is also a risk associated with trading on equity. If the assets do not appreciate in value, the investor will have to repay the loan with interest, which could result in a loss. Therefore, it is important to carefully consider the risks and potential rewards before engaging in trading on equity.
Here is a brief explanation of each option:
- Option A: Rate of Interest < Rate of Return. This is the correct answer. If the rate of interest is less than the rate of return, then the investor will make a profit on the investment.
- Option B: Rate of Interest > Rate of Return. This is not the correct answer. If the rate of interest is greater than the rate of return, then the investor will lose money on the investment.
- Option C: Both A and B. This is not the correct answer. Only option A is correct.
- Option D: None of A and B. This is not the correct answer. Option A is correct.