For a Levered Firm Where B_A = Beta of Assets

question 13

Multiple Choice

For a levered firm where b_A = beta of assets and b_D = beta of debt, the return on equity (r_E) is equal to

• A)r_E = r_A.
• B)r_E = r_A + (D/E)× [r_A − r_D]
• C)r_E = r_A + (D/(D +E))× [r_A - r_D]
• D)None of these options.

---

Definitions:

Herfindahl-Hirschman Index

A measure of market concentration to assess the level of competition among firms within an industry.

Market Share Percentages

The proportion of sales in the total market sold by one company, expressed as a percentage.

Celler-Kefauver Act

A United States antitrust law passed in 1950, designed to prevent anti-competitive mergers and acquisitions that could create monopolies or reduce competition.

Clayton Act

Passed by Congress in 1914 to strengthen the Sherman Act and clarify the rule of reason, the act outlawed specific monopolistic behaviors such as tying contracts, price discrimination, and unlimited mergers.