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

Question

Quizplus · Accepted Answer

The beta of the common stock of a levered firm is greater than that of an unlevered firm because leveraging increases the risk to equity holders, which is reflected in a higher beta.

Comparing Two Otherwise Equal Firms, the Beta of the Common