Debt beta when unlevering
IB
Tags:
(Monkey, 54
Points)
on 1/18/13 at 11:05am
In converting from levered->unlevered beta, is it standard practice in the industry to assume the debt beta is zero? In my finance class I've learned a formula like this:
Unlev Beta = D/V * Beta_d + E/V*Beta_e (lev beta)
Then online in interview prep materials/etc I see the formula for unlev beta assumes Beta_d = 0 and reworks the equation to be:
Unlev Beta = Lev Beta / (1 + D/E)
Is this an assumption that's made more often than not in the industry?






Yes the assumption is that
Yes the assumption is that Debt is no volatility.
The dragon dozes off in the spirit which is its dwelling.