MM Proposition II States That

question 69

Multiple Choice

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

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Definitions:

NAFTA

The North American Free Trade Agreement, a treaty between Canada, Mexico, and the United States that was designed to remove tariff barriers between the three countries.

Free Trade

The unregulated exchange of goods and services across borders without tariffs or other barriers.

Political Union

A type of state or entities agreement which involves a shared government and often a merged economy and policy-making.

Trade Restrictions

Measures implemented by countries to regulate or limit the import and export of goods and services, including tariffs, quotas, and embargoes.