The expected return on equity is Blank______ to leverage.Multiple choice question.negatively relatedunrelatedpositively related

The expected return on equity is Blank______ to leverage

Levered equity has Blank______ risk than unlevered equity.Multiple choice question.lessthe samegreater

A CEO explains “we can increase our expected return on equity by increasing leverage.” Which of the following is the best response to this statement?A.This statement is not necessarily true—it depends upon a whole range of factors.B.This is false, equity holders are residual claimants and increased interest payments will leave less profit to distribute to shareholders.C.This is true, but the higher returns will be associated with increased risk.D.This is always true since leverage makes the firm more disciplined and increases returns.

Whenever the cost of capital for an all-equity firm is greater than the cost of debt, the cost of equity Blank______.Multiple choice question.is unaffected by leverageincreases with leveragedecreases with leverage

When an investor borrows money and uses it to purchase stocks is called Blank______.Multiple choice question.homemade de-leverageraising debthomemade equityhomemade leverage