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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Definitions:

Brachial Artery

A major blood vessel of the upper arm that supplies blood to the arm and hand.

Antecubital Space

The inner side or bend of the elbow; the site at which the brachial artery is felt or heard when a pulse or blood pressure is taken.

Rapid Breathing

Breathing at an abnormally fast rate, which can be a symptom of various medical conditions or distress.

Degrees Celsius

A scale and unit of measurement for temperature where water freezes at 0 degrees and boils at 100 degrees under standard conditions.