The Modigliani and Miller Capital Structure Theorem Suggests That the Cost

question 39

True/False

The Modigliani and Miller Capital Structure Theorem suggests that the cost of equity decreases as financial leverage increases.

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Definitions:

Investment Horizon

Investment horizon refers to the total length of time that an investor expects to hold a portfolio or an investment before taking profits or closing positions.

Duration

A financial metric that estimates the weighted average time it takes for an investor to be repaid the bond's cash flows, serving as a measure of interest rate sensitivity.

Promised Yield

The return that a bond issuer agrees to pay to the bondholder until maturity, expressed as an annual percentage.

Coupon Rate

The annual interest rate paid by a bond issuer to the bondholder, usually expressed as a percentage of the bond's face value.