Problem:
Beta Corp has an unlevered beta of 1.0. Beta Corp is financed with 50% debt and has a levered beta of 1.6.If the risk free rate is 5.5% and the market risk premium is 6% how much is the additional premium that Beta Corp shareholders require to be compensated for financial risk?
Explain how to evaluate the use of securities options in risk hedging as they might apply to common organizational activities.