nvBank (B) is a purely investment banking company considering expanding into the retail stock trading business. The expansion will take five years. IB has a market capitalization (market value of assets) of $1billion, and it has a market value-based Debt/Equity ratio of 1.0. Amirade (AT) is a pure retail stock trading company, and it has an equity beta of 2.0 and has no debt. The marginal tax rate for IB is 30%. The target capital structure for IB after the expansion is 20% debt and 80% equity. The marginal tax rate for AT is 25%. The 5-year Treasury (risk-free) rate is 3% per year, and the risk premium on the market is 5% IB's debt is rated "A" and the spread (relative to 5- year Treasury) for the debt is 2%. For levering and unlevering betas, use the formula:

Answer rating: 100% (QA)

To calculate the levered beta for nvBank B after the expansion into the retail stock trading busines... View the full answer