Assertion (A): Arbitrage keeps the cost of capital constant despite change in the capital structure.
Reason (R): It ensures compensating inverse change in cost of equity capital with a change in the cost of debt capital.
A. (A) and (R) both are true and (R) is the correct explanation of (A)
B. (A) and (R) both are true, but (R) is not the correct explanation of (A)
C. (A) is true, but (R) is false
D. (A) is not true, but (R) is true
Answer: Option A
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