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.

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

b.

Less volatile than the return on equity of Firm B.

c.

More volatile than the return on equity of Firm B.

d.

Unaffected by the debt-equity ratio.