Here is the following scenario for a 1 year investment: Purchase stock $100 Equity invested: $80 Debt: $10 Interest Payments: $1 (10% interest) Sales price after 1 year: $150 If the leverage ratio were to decrease would the rate of return for the year increase or decrease? Why? Increase; Increasing leverage amplifies returris because the denominator in the rate of return calculation is growing Increase increasing leverage amplifies returns because the denominator in the rate of return calculation is shrinking Decrease: Decreating leverage means a greater amount of equity is invested, which means the denominator in the rate of return calculation is increasing Increase: Decreasing leverage amplies returns because the denominator in the rate of return calculation is shrinking