According to MM II, if the expected return on assets decreases, what happens to the expected return on equity?

Name: According to MM II, if the expected return on assets decreases, what happens to the expected return on equity?
Brand: Quizplus
Rating: 4.9 (53 reviews)

Question

Quizplus · Accepted Answer

According to MM II, the expected return on equity is dependent on the riskiness of the firm's assets and does not change with changes in the firm's capital structure. Therefore, if the expected return on assets decreases, the expected return on equity will also decrease.

According to MM II, If the Expected Return on Assets