Firm A has a debt-equity ratio of .5. Firm B has a debt-equity ratio of .8. All other features of these firms are identical. The return on equity of Firm A is:

Select one:

a.

More volatile than the return on equity of Firm B.

b.

Less volatile than the return on equity of Firm B.

c.

Unaffected by the debt-equity ratio.

d.

Equally as volatile as the return of equity of Firm B.