Answered

Welcome to Westonci.ca, the Q&A platform where your questions are met with detailed answers from experienced experts. Get detailed and precise answers to your questions from a dedicated community of experts on our Q&A platform. Join our Q&A platform to connect with experts dedicated to providing accurate answers to your questions in various fields.

If investors' aversion to risk rose, causing the slope of the SML to increase, this would have a greater impact on the required rate of return on equity, rs, than on the interest rate on long-term debt, rd, for most firms. Other things held constant, this would lead to an increase in the use of debt and a decrease in the use of equity. However, other things would not stay constant if firms used a lot more debt, as that would increase the riskiness of both debt and equity and thus limit the shift toward debt.

a. True
b. False

Sagot :

ogorwyne

Answer:

a. true

Explanation:

This answer is true because as firms use greater debt, this is going to raise the riskiness of debt and equity and it would limit the shift towards debt

We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.