Explain Why, as a Function of the Debt-Equity Ratio, the Cost

question 55

Essay

Explain why, as a function of the debt-equity ratio, the cost of debt graph is concave at high levels of debt.

---

Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers at those prices.

Price

The cost in money to purchase a particular good or service.

Income Elasticity

A measure of how the quantity demanded of a good responds to a change in consumers' income.

Voice Mail

An electronic communication system that allows users to leave voice messages for others to retrieve later.