A firm's book value of equity is unchanged. It issues $$50$M of corporate bonds, and uses it to purchase a $$50$M building. The net income of the firm is unchanged. Therefore...

$(2$ Points$)$

The return on equity increases, the return on assets is unchanged.

The return on equity is unchanged, the return on assets increases.

The return on equity increases and the return on assets declines.

The return on equity is unchanged, the return on assets declines.