The asset beta of a levered firm is generally:
A)equal to the equity beta.
B)different from the equity beta.
C)different from the debt beta.
D)the simple average of the equity beta and debt beta.
E)Both B and C.

Question

Quizplus · Accepted Answer

The asset beta of a levered firm is different from the equity beta because the equity beta reflects the financial risk due to leverage. It is also different from the debt beta, as the debt beta typically reflects lower risk compared to equity.

The Asset Beta of a Levered Firm Is Generally