Its a finance thing. You will expect a greater rate of return from equity because its more risk than debt. For example a company is worth $10 $5 equity and $5 d

Its a finance thing. You will expect a greater rate of return from equity because its more risk than debt. For example a company is worth $10 $5 equity and $5 dollars debt. If company value goes to $20 the value of equity has tripled, but debt is still worth $5. However if company value goes to $5 well equity goes to 0, but debt is still worth $5. Since you are taking more risk with equity you need a greater rate of return on equity. So when equity is priced it needs to have a better return than debt for the added risk.