Volatility or Blank______ increases for equity holders when leverage increases.Multiple choice question.yield-to-maturityriskinevitabilitycertainty

To address the multiple-choice question regarding what increases for equity holders when leverage increases, we first need to understand the concepts involved.

Analyzing the Question

1. Leverage and Equity Holders: Leverage refers to the use of borrowed funds to amplify potential returns on investment. However, while leverage can enhance returns, it can also increase risk.

Options Analysis

2. Yield-to-Maturity (YTM): This is a measure used for bonds, indicating the total return anticipated if a bond is held until maturity. Not directly related to equity holders in the context of leverage.

3. Risk: With increased leverage, the financial risk for equity holders increases because they face a higher chance of default or bankruptcy. This is the most relevant option.

4. Inevitability: This term does not apply directly to the financial concepts in question.

5. Certainty: Increased leverage typically decreases certainty regarding returns, rather than increasing it.

Conclusion

Given the above considerations, the correct choice that fits the statement "Volatility or ______ increases for equity holders when leverage increases" is risk.

Final Answer

Risk increases for equity holders when leverage increases.