Assertion (A): Trading on equity raises the return on equity to the shareholders of a company.
Reason (R): The cost of debt is lower than the cost of equity and interest paid on debt is tax deductible.
1
Both (A) and (R) are true, and (R) is the correct explanation of (A).
2
Both (A) and (R) are true, and (R) is not the correct explanation of (A).
3
(A) is true, but (R) is false
4
(A) is false, but (R) is true