Answered

Get expert advice and community support on IDNLearn.com. Get accurate and detailed answers to your questions from our knowledgeable and dedicated community members.

Comparing two otherwise equivalent firms, the beta of the common stock of the levered firm is _____ the beta of the common stock of the unlevered firm.

Sagot :

The beta of the common stock of the levered firm is higher than the beta of the common stock of the unlevered firm.

Beta is a measure of systematic risk. Systemic risk is risk that cannot be diversified away. The higher the beta of a firm, the higher the level of risk of the firm.

A levered firm is a firm with debt in its capital structure. An unlevered firm is a firm that does not have debt in its capital structure. Debt increases the level of risk in a firm. Thus, the beta of a  levered firm would be higher than that of an  unlevered firm.

A similar question was answered here: https://brainly.com/question/15714242

Thank you for using this platform to share and learn. Keep asking and answering. We appreciate every contribution you make. IDNLearn.com is your source for precise answers. Thank you for visiting, and we look forward to helping you again soon.