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:
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.

Jennifer purchased a house in a brand new development in the outskirts of town. when her house was built, the nearest fire department was nearly 20 miles away. as her neighborhood developed, the density of the community called for a new fire department 1.5 miles away. what effect will the new fire station have on her homeowners insurance premium? a. a new fire department will be more demanding on local taxes. her annual premium will go up. b. the location of a fire department has no bearing on the value of her house. her annual premium will stay the same. c. the new fire department will reduce the risk of financial loss in her home. her annual premium should decrease. d. with a fire department so close (less than 5 miles), financial risk on jennifer’s home practically disappears. she will not need to pay insurance anymore.