Wang Securities had a long-term stable debt-to-equity ratio of 0.65. Recent bank borrowing for expansion into South America raised the ratio to 0.75. The increased leverage has what effect on the asset beta and equity beta of the company?
a. The asset beta and the equity beta will both rise.
b. The asset beta will remain the same and the equity beta will rise.
c. The asset beta will remain the same and the equity beta will decline.
Ans: b. The asset beta will remain the same and the equity beta will rise.
Business
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Fill in the blank with correct word.
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