MODIGLIANI AND MILLER: THEORY OF INVESTMENT 275 rise as D/S increases, but at a decreasing rather than a constant rate Beyond some high level of leverage, depending on the exact form of the interest function, the yield may even start to fall. The relation between and D/S could conceivably take the form indicated by the curve MD RATIO OF DEBT TO ToTAL MARKET VALUE: DJ/5 FIGurE 1 DEBT TO EQUITY RATIO: D/S FIGURE 2 Figure 2, although in practice the curvature would be much less pro- nounced. By contrast, with a constant rate of interest, the relation would be linear throughout as shown by line MM, Figure 2 The downward sloping part of the curve MD perhaps requires some a Since new lenders are unlikely to permit this much leverage f. note 17), this range of the likely to be occupied by companies whose earnings prospects have falle since the time when their debts were issued