Which of the following statements is not true with respect to the use of debt in an investment context

a. Increased leverage is beneficial when the investment return is higher than the rate of interest

b. Increased leverage increases a funds risk of financial distress

c. Increased leverage will always result in a higher return

d. Increased leverage will increase the volatility of investment portfolios returns

2. Households who borrow late in a housing market cycle tend to have reduced default risk

a. True b. False