Hi, I have a problem with calculating the beta of debt. My company is BBB- rated and I looked up an appropriate default spread of 3,2%. My risk premium is 4,2%.
according to the capm, the beta of debt should be calculated by defaultspread/riskpremium. this yields more than 0,7 in my case and from what I have heard is way too high for a beta of debt. Why cant I estimate the beta of debt via the capm?
damodaran in his book at some point says that he assums that only 50% of the default spread carries market risk and therefore divides the beta I obtain by 2. But I thought idiosyncratic risk is

See more answers at brainly.com

not priced in by assumption in the CAPM.

not priced in by assumption in the CAPM.

0.0

Looking for something else?

Not the answer you are looking for? Search for more explanations.