MM Proposition II states that:
A) The expected return on equity is positively related to leverage
B) The required return on equity is a linear function of the firm's debt to equity ratio
C) The risk to equity increases with leverage
D) All of the above
E) None of the above

Question

Quizplus · Accepted Answer

MM Proposition II states that the expected return on equity is positively related to leverage, the required return on equity is a linear function of the firm's debt to equity ratio, and the risk to equity increases with leverage.

MM Proposition II States That