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Beta of Equity

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A levered firm has market value of debt D and market value of equity E. The beta of asset is bA and beta of debt is bD. The beta of equity (bE) is equal to:

E. bE = bA
F. bE = bA + (D/E) * [bA - bD]
G. bE = bA + (D/(D + E)) * [bA - bD]
H. None of the above

I can't find any info on this. Every time I work the equation I get something different, but I don't think that the answer is "none of the above". Any ideas? Any help you can give would be appreciated.

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The expert examines beta of equity.

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Computation of beta of equity using the accounting equation:

The answer is H. None of the above. Here's why...

Solution, based on the accounting ...

Solution provided by:
Elisa Valdez, PhD
Education
  • Bachelor of Science in Business Administration, University of the Philippines
  • Master in Business Administration, Saint Mary's University
  • Doctor of Philosophy in Education, University of the Philippines
  • Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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