Consider the Following Two Statements: (I) the Beta of Levered

question 10

Multiple Choice

Consider the following two statements: (i) The beta of levered equity must be greater than the beta of the unlevered firm
(ii) Leverage increases the equity beta more rapidly under corporate taxes.

• A)(i) is correct and (ii) is incorrect.
• B)(ii) is correct and (i) is incorrect.
• C)Both (i) and (ii) are correct.
• D)Both (i) and (ii) are incorrect.
• E)leverage does not impact betas.

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