The beta of the common stock of unlevered firm

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Reference no: EM131933533

1. Comparing two otherwise equal firms, the beta of the common stock of an unlevered firm is _____________ the beta of a levered firm.

A. less than

B. equal to

C. slightly greater than

D. significantly greater than

2. BPJ stock is expected to earn 6.3 percent in a normal economy, 14.8 percent in a booming economy, and lose 4.7 percent in a recession. The probability of a recession is 20 percent while the probability of a normal economy is 55 percent and the probability of a booming economy is 25 percent. What is the expected rate of return on this stock?

A. 6.23%

B. 6.72%

C. 6.81%

D. 7.60%

E. 8.11%

Reference no: EM131933533

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