Sir in Beta asset formula we assume that debt beta is zero because the interest rate on debt will not vary and it makes the debt risk free.
Sir is this statement correct or not and if not than can you tell me that why debt beta is zero?
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Debt beta
6y ago#1For the exam, yes - we assume that debt is risk free and therefore the beta is zero.
(In practice debt does have some risk, and therefore will have a small beta, but again not in exams.)
Thank you sir :)
6y ago#3You are welcome :-)
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