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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

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