In: Finance
Premium for Financial Risk Ethier Enterprise has an unlevered beta of 1.25. Ethier is financed with 55% debt and has a levered beta of 1.75. If the risk free rate is 6% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk? Round your answer to two decimal places. %
Additional premium that Ethier's shareholders require to be
compensated for financial risk
=(1.75-1.25)*6%
=3%