The Graphical Probability Distribution of ROE for a Firm That

question 36

True/False

The 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:

Group Polarization

The tendency for a group to make decisions that are more extreme than the initial inclination of its members, either more conservative or riskier.

Risky Shift

The phenomenon where groups make riskier decisions than individuals would.

Group Norms

Unwritten rules or expectations within a group that dictate the behaviors, values, and attitudes of its members.

Social Reality

The shared beliefs, practices, norms, and values that are constructed by society and perceived as real and valid by its members.