For the levered firm the equity beta is __________ the asset beta.

Question

Quizplus · Accepted Answer

The equity beta for a levered firm takes into account the financial leverage of the firm (i.e. the use of debt financing). As a result, the equity beta is typically higher than the asset beta, which only reflects the risk of the firm's underlying assets. The extent to which the equity beta is higher than the asset beta depends on the level of financial leverage employed by the firm.

For the Levered Firm the Equity Beta Is __________ the Asset