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anonymous

  • 5 years ago

Hye, may i know how to calculate Debt Beta?

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  1. anonymous
    • 5 years ago
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    Calculate the real resources cost of the investment. The real resource is the amount that the creditors have invested. Add 1 with the risk-free rate of interest, then divide that number by 1 minus the actual premium. Subtract this solution by 1 to figure out the real resources cost. The risk-free rate is the basis of the assets, but it includes the risk premium. Calculate the default risk premium. Take the real resource cost and subtract it by the risk-free rate of the interest. The calculation must be in percentage or decimals. Complete the calculations by adding the risk-free rate to the default risk premium.

  2. anonymous
    • 5 years ago
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    I dont quite understand, this sound like cost of debt, how about the Beta for debt (assume is not Zero)

  3. anonymous
    • 5 years ago
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    Here is the simplest way and you can use it, if have a pre-tax cost of debt computed for your company: Beta for debt = (Pre-tax cost of debt - Riskfree rate)/ Equity Risk Premium

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