Answered

Welcome to Westonci.ca, where you can find answers to all your questions from a community of experienced professionals. Our Q&A platform provides quick and trustworthy answers to your questions from experienced professionals in different areas of expertise. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.

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

Thanks for using our platform. We're always here to provide accurate and up-to-date answers to all your queries. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Keep exploring Westonci.ca for more insightful answers to your questions. We're here to help.