Consider the Following Equation: βU = βE

question 8

Multiple Choice

Consider the following equation: βU = βE + βD
The term βD in the equation is:

• A)the same as the beta of the firm's assets.
• B)the required return on the firm's equity.
• C)the proportion of the firm financed with equity.
• D)equal to zero if the firm's debt is riskless.

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Definitions:

Market Rate of Return

The average return that investors expect to earn from a particular investment, based on historical or anticipated performance.

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