# Beta of debt, equity and assets

The following table lists possible rates of return for company X stock and debt and on the market portfolio. The probability is listed.

State Probability Return on Stock (%) Return on Debt (%) Return on Market (%)

1 0.1 3% 8% 5%

2 0.3 8% 8% 10%

3 0.4 20% 10% 15%

4 0.7 15% 10% 20%

a. What is the Beta of Company X debt?

b. What is the Beta of Company X stock?

c. If the debt-to equity Ratio of Company X is 0.5, what is the asset beta of Company X? Assume no taxes.

https://brainmass.com/business/accounting/beta-debt-equity-assets-127260

#### Solution Summary

The solution calculates the beta of debt, equity and assets, given the probability distribution of return on equity, debt and market and the debt-equity ratio.

$2.19