The Equity Beta of a Levered Firm Is 1

question 50

Multiple Choice

The equity beta of a levered firm is 1.2. The beta of debt is 0.2. The firm's market value debt to equity ratio is 0.5. What is the asset beta if the tax rate is zero?

• A)1.20
• B)0.73
• C)0.20
• D)0.87

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Definitions:

Congress

The national legislative body of the United States, consisting of two houses: the Senate and the House of Representatives.

Executive

A branch of government responsible for implementing and enforcing laws, typically headed by a president or prime minister.

Individualistic Behavior

Actions or attitudes that prioritize personal goals and self-expression over collective goals or communal responsibilities.

Party Unity

The degree to which members of a political party stick together to achieve common political objectives, often reflected in voting cohesion or mutual support.