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In​ mid-2009, Systemico Inc had a market capitalization of $120 billion. It had​ BBB-rated debt of...

In​ mid-2009, Systemico Inc had a market capitalization of $120 billion. It had​ BBB-rated debt of 35 billion, and its estimated equity beta at the time was 1.25.

Estimate Systemico's riskiness of the underlying business enterprise.

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Answer #1

Equity beta is also knowm as the Levered beta. It refers to the Beta of the firm which has debt or Financial leverages.

On the other hand Asset beta is the beta of the firm, by assuming that the firm has no Debt. it measures the riskness of the Firm without considering the debt.

Hence we have to calculate the asset beta of Systemico In to know the riskness of the underlying business.

=>

Systemico's riskiness of the underlying business enterprise is its asset beta that is 0.97.

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