Author Question: If a firm has an unlevered beta equal to 1.0 a debt-equity ratio of .50 and a tax rate of .30, ... (Read 91 times)

Jramos095 · **on:** Jul 11, 2018

If a firm has an unlevered beta equal to 1.0 a debt-equity ratio of .50 and a tax rate of .30, calculate the value of the firm's levered beta.

A) 0.65
B) 1.00
C) 1.35
D) 1.73

Question 2

In a surety arrangement, the party who benefits from the bond if the bonded party fails to perform is the

A) principal.
B) obligee.
C) fidelity.
D) surety.

katkat_flores · **Reply #1 on:** Jul 11, 2018

Answer to Question 1

C
Explanation: C) L = (1+(D/E)(1-t)) U
= (1+(.50)(1-.30)1 = 1.35.

Answer to Question 2

A) principal.
B) obligee.
C) fidelity.
D) surety.
Answer: B