Return on Equity Increases When the Expected Rate of Return

question 227

True/False

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

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Definitions:

Seize

To take possession of something, often by legal authority, because of a rule or law.

Suretyship

A contractual obligation undertaken by a surety to be responsible for another's performance of an obligation or payment of debt, should that party fail to perform.

Guaranty

A legal commitment to be responsible for another's debt or contractual performance if that person fails to meet their obligations.

Primarily Liable

Liable for paying the amount designated on an instrument when it is presented for payment.