The Asset Beta of a Levered Firm Is 1

question 16

Multiple Choice

The asset beta of a levered firm is 1.1.The beta of debt is 0.3.If the debt equity ratio is 0.5,what is the equity beta? (Assume no taxes.)

• A)1.5
• B)1.1
• C)0.3
• D)0.15

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Definitions:

Confidence Interval Estimate

An interval of values calculated from a sample that is expected to include the value of an unseen population parameter, with a certain degree of confidence.

Prediction Interval

An estimate of an interval in which future observations will fall, with a certain probability, given what has already been observed.

Simple Linear Regression

A statistical method used to model the relationship between a single independent variable and a dependent variable by fitting a linear equation to observed data.

T-Table Values

Critical values used in t-tests that determine the thresholds for significance based on the sample size and desired confidence level.