As the Debt to Equity Ratio Decreases When Debt Is

question 17

Multiple Choice

As the debt to equity ratio decreases when debt is not risk free:

• A)debt holders demand a higher expected return.
• B)debt holders demand a lower expected return.
• C)the expected return on equity increases.
• D)the expected return on assets increases.

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Definitions:

Identical Characteristics

A term describing goods, services, or entities that have the same attributes and qualities, making them indistinguishable in certain respects.

Wage Differentials

The variations in wage rates due to differences in occupation, sector, qualifications, and experience among workers.

Labor Market

A marketplace where employers find workers and workers find jobs, governed by supply and demand for labor.

Productivity Differences

Variations in the efficiency and effectiveness with which firms or economies turn inputs into outputs.