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
E) None of these.

Question

Quizplus · Accepted Answer

The beta of the common stock of a levered firm is greater than the beta of the common stock of an unlevered firm. This is because the use of leverage amplifies the returns and risk of the company, leading to higher beta.

Comparing Two Otherwise Equal Firms,the Beta of the Common Stock