Comparing Two Otherwise Equal Firms, the Beta of the Common

question 8

Multiple Choice

Comparing two otherwise equal firms, the beta of the common stock of a levered firm is ____________ than the beta of the common stock of an unlevered firm.

• A) equal to
• B) significantly less
• C) slightly less
• D) greater

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Definitions:

Neutrons

Subatomic particles found in the nucleus of an atom; they are electrically neutral and along with protons, contribute to the atomic mass.

Ionic Bond

Chemical bond in which ions are attracted to one another by opposite charges.

Transferred

The act of moving or passing something from one place, person, or thing to another.

Shared Equally

Distributed in an identical manner among all parties involved, ensuring parity and fairness.