Companies face the challenge of determining whether to issue debt or equity for financing needs. Issuance of debt or equity both have advantages and disadvantages.
Advantages of Issuing Debt
1. Issuance of debt has a tax benefit because of the debt tax shield. The interest payments to debt owners are expensed, causing a reduction taxable income. A company with a higher tax rate thus has a higher tax benefit from debt issuance
2. Some assert that debt adds discipline to management because interest expenses cause lower left over cashflows, which makes management more …

The MIT Department of Economics World Economy
Laboratory Conference Washington, D.C.
Delivered April 26, 1994
When Rudi Dornbusch invited me to speak at this conference, he gave me a totally free hand in deciding what I wanted to talk about. Well, I want to discuss a subject which fascinates me but doesn’t seem to interest others very much. That is my theory of reflexivity which has guided me both in making money and in giving money away, but has received very little sdeerious consideration from anybody else. It is really a very curious …

George Soros
George Soros is an extremely successful stock speculator and investor. From 1970 to 1980, Soros’s Quantum Fund returned an average of 42.5% per year. Forbes ranked Soros as the 24th wealthiest person in the world in 2004, with an estimated net worth of $7.2 billion.
Soros is famously known for breaking the Bank of England in 1992 when his bearish trades precipitated the fall of the European monetary system. The successful trade earned Soros an estimated $1.1 billion. Soros successfully repeated this trade again during the 1996 and 1998 Asian currency …

Henry Paulson JR is the United States Treasury Secretary. Paulson has been serving as Treasury Secretary since May 30, 2006. In addition, Paulson serves as a member of the the International Monetary Fund (IMF) Board of Governors. Before becoming Treasury Secretary, Paulson served as CEO and Chairman of Goldman Sachs. Goldman Sachs is one of the most successful and prestigious global investment banks.
These credentials evidence how experienced, knowledgeable, and successful Paulson is. In this 2004 video, filmed at the Harvard Business School, Paulson comments on a variety of business, economic, …

Normal distributions (a bell curve) of asset returns is a key assumption made by many financial models, including the capital asset pricing model(CAPM) and the Black-Scholes option pricing model(BSM). However, actual asset returns may not be so normal.
Normal Distributions Overestimate the Improbability of Unlikely Market Events
Using a normal distribution, events that diverge from the mean by five or more standard deviations, known as a five-sigma event, are very rare and ten-sigma events are nearly impossible. For example, the 1987 market plunge represents a change equalling 22 standard deviations. The odds …