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:

Ownership Interest

Refers to the legal rights and claims an individual or entity has over a property or asset.

Ethical Reasoning

The process of evaluating what is right or wrong in a moral sense and making decisions based on ethical principles.

Relevant Stakeholders

Individuals or groups who may be affected by or have an interest in a particular decision or action within a business or project.

Legal

Legal pertains to matters related to laws, the system of rules that are created and enforced through social or governmental institutions to regulate behavior.