MM Proposition II States That

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.