Mean (expected value)¶
The value a random variable takes on average. For returns, it is the long-run average return.
Key terms from the scenes, grouped by chapter. Each term links to the scene where it is introduced.
The value a random variable takes on average. For returns, it is the long-run average return.
The standard deviation of returns. A larger value means returns spread more widely around the mean.
In a perfect market, capital structure does not affect firm value. With corporate tax, firm value rises by the tax shield: .
The tax saved because interest expense lowers taxable income. It grows with debt, while bankruptcy costs push the other way.