Graphical Probability Distribution of ROE for a Firm That Uses

question 35

True/False

graphical probability distribution of ROE for a firm that uses financial leverage would tend to be more peaked than the distribution if the firm used no leverage, other things held constant.

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Definitions:

Utils

A hypothetical unit of measurement used in economics to represent the satisfaction or utility that a consumer receives from consuming goods and services.

Substitution Effect

The change in consumption patterns due to a change in relative prices, where consumers replace more expensive items with less costly alternatives.

Inferior Good

Items for which demand falls when the income levels of buyers go up, unlike standard goods that see an increase in demand with rising incomes.

Income Effect

How shifts in the financial status of individuals or whole economies affect their purchasing desires for specific goods or services.