What Would Be the Impact of Leverage on the Expected

question 21

Essay

What would be the impact of leverage on the expected return and standard deviation of purchasing an asset with 10% of the owner's funds and 90% borrowed funds?

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Definitions:

Hypothesis

A suggested rationale for an occurrence, offered as an initial basis for more detailed exploration.

Theory

An abstract set of ideas or principles that explains phenomena or aspects of the natural or social world.

Radical Behaviorists

Psychologists who follow a doctrine emphasizing the external behaviors of people and their reactions on a given situation, largely ignoring internal processes like cognition.

Behavioral Observations

The method of studying subjects' actions in their natural settings without intervention.