MM Proposition II States That

question 62

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)the expected return on equity is positively related to leverage, the required return on equity is a linear function of the firm's debt to equity ratio, and the risk to equity increases with leverage.

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Definitions:

Flashbulb Memories

Flashbulb memories are vivid, detailed memories of significant events that feel as if they have been imprinted or 'burned in' like a photograph, often associated with surprise or emotional shock.

Primacy And Recency Effects

The tendency to remember the first (primacy) and last (recency) items in a series better than those in the middle.

Schema

A cognitive framework or concept that helps organize and interpret information, allowing individuals to make sense of their experiences and the world around them.

Proactive Interference

The phenomenon where old information interferes with the ability to learn or remember new information.