Financing rg rb E[r] sd(r) 5% Bond 7.14% 0% Unlevered equity 23.5% -38.2% Levered equity 50% -100% 5% 5% 3.27% 28.27% 68.74% Levered equity is the least risky financing; then unlevered equity; then debt Levered equity is the riskiest financing; then unlevered equity; then debt Since all financing have the same return, they also carry the same risk