When Millie Met Caryl for the First Time, She Liked

question 38

Multiple Choice

When Millie met Caryl for the first time, she liked her. Caryl is in two of Millie's classes this quarter, and Millie now sees her all the time. Which of the following is likely?

• A) Millie will like Caryl more as the result of increased familiarity.
• B) Millie will like Caryl more as the result of increased responsiveness.
• C) Millie will dislike Caryl more as the result of increased familiarity.
• D) Millie will grow more neutral in her emotional responses to Caryl as the result of increased familiarity.

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Definitions:

Capital Structure

The mix of debt and equity financing a company uses to fund its operations and growth.

M&M Proposition II

Modigliani and Miller's Proposition II states that a company's cost of equity increases as it increases its leverage due to the risk premium on equity.

Debt-Equity Ratio

A financial ratio that measures the relative proportion of shareholders' equity and debt used to finance a company's assets.

Financial Risk

The chance of incurring a loss in capital in an investment or business operation.