{
  "id": 54724,
  "date": "2023-03-28T16:02:54",
  "date_gmt": "2023-03-28T20:02:54",
  "guid": { "rendered": "https:\/\/finance-able.com\/?p=54724" },
  "modified": "2025-12-21T16:49:49",
  "modified_gmt": "2025-12-21T21:49:49",
  "slug": "unlevered-beta-formula",
  "status": "publish",
  "type": "post",
  "link": "https:\/\/finance-able.com\/unlevered-beta-formula\/",
  "title": { "rendered": "Unlevered Beta Formula – Ultimate Guide" },
  "content": {
    "rendered": "\n<p style=\"font-size:18.5px\">Master the <strong>Unlevered &amp; Levered Beta Formulas<\/strong> so you can use them in interviews and on the job in <a href=\"https:\/\/finance-able.com\/investment-banking-career-path\/\"><u><strong>Investment Banking<\/strong><\/u><\/a>, <a href=\"https:\/\/finance-able.com\/private-equity-vs-venture-capital\/\"><strong><u>Private Equity<\/u><\/strong><\/a>, and <a href=\"https:\/\/finance-able.com\/hedge-fund-vs-mutual-fund\/\"><strong><u>Investment Management<\/u><\/strong><\/a>.<\/p>\n\n\n\n<p>In this article, you will learn:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><p>What <strong>Beta<\/strong> actually is and <strong>why it is important.<\/strong><\/p><\/li>\n\n\n\n<li><p>The differences between <strong>Levered<\/strong> <strong>vs Unlevered Beta<\/strong>.<\/p><\/li>\n\n\n\n<li><p>How to <strong>source Beta<\/strong> and how to <strong>calculate Beta for a Private Company<\/strong>.<\/p><\/li>\n\n\n\n<li><p>How to answer the <strong>most commonly asked interview questions<\/strong> involving <strong>Beta<\/strong>.<\/p><\/li>\n<\/ul>\n\n\n\n<div style=\"height:15px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"yoast-reading-time__wrapper\"><span class=\"yoast-reading-time__icon\"><svg aria-hidden=\"true\" focusable=\"false\" data-icon=\"clock\" width=\"20\" height=\"20\" fill=\"none\" stroke=\"currentColor\" style=\"display:inline-block;vertical-align:-0.1em\" role=\"img\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 24 24\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M12 8v4l3 3m6-3a9 9 0 11-18 0 9 9 0 0118 0z\"><\/path><\/svg><\/span><span class=\"yoast-reading-time__spacer\" style=\"display:inline-block;width:1em\"><\/span><span class=\"yoast-reading-time__descriptive-text\">Estimated reading time: <\/span><span class=\"yoast-reading-time__reading-time\">11<\/span><span class=\"yoast-reading-time__time-unit\"> minutes<\/span><\/p>\n\n\n\n\n\n<p><\/p>\n\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-tl-dr\">TL;DR<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><p>Beta is a measure of the <strong>risk profile<\/strong> of a Company relative to the overall market.<\/p><\/li>\n\n\n\n<li><p><strong>Unlevered Beta<\/strong> measures the risk profile of a firm <strong>without taking into account<\/strong> its Capital Structure (i.e., not taking into account the company&#8217;s level of Debt).<\/p><\/li>\n\n\n\n<li>Investors use <strong>Levered Beta<\/strong> in the<strong style=\"font-size: revert; color: var(--global-palette4);\"> <a href=\"https:\/\/www.investopedia.com\/terms\/c\/capm.asp#:~:text=The%20capital%20asset%20pricing%20model%20%2D%20or%20CAPM%20%2D%20is%20a%20financial,to%20the%20market%20(beta).\" target=\"_blank\" rel=\"noreferrer noopener\">Capital Asset Pricing Model (CAPM)<\/a><\/strong> to calculate Investor Expected Returns (i.e, the &#8216;Cost of Equity&#8217;). <\/li>\n<\/ul>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-columns containerwidth is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:100%\"><div class=\"kb-row-layout-wrap kb-row-layout-id54724_6d4dcb-3c alignnone wp-block-kadence-rowlayout\"><div class=\"kt-row-column-wrap kt-has-1-columns kt-row-layout-equal kt-tab-layout-inherit kt-mobile-layout-row kt-row-valign-top\">\n\n<div class=\"wp-block-kadence-column kadence-column54724_222a93-db inner-column-1\"><div class=\"kt-inside-inner-col\">\n<h2 class=\"wp-block-heading\" id=\"h-want-to-learn-more-about-finance\" style=\"font-size:35px\"><strong>Want To Learn More About Finance?<\/strong> <\/h2>\n\n\n\n<p style=\"font-size:18px\"><strong>Ramp up faster with all of our (free) deep-dive articles in our<\/strong> <a href=\"https:\/\/finance-able.com\/analyst-starter-kit\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><span class=\"has-inline-color has-vivid-cyan-blue-color\">Analyst Starter Kit<\/span><\/strong><\/a>:<\/p>\n\n\n<div class=\" wp-block-kadence-portfoliogrid kb-blocks-portfolio-loop-block alignnone kb-portfolio-loop54724_8566e3-49 kb-portfolio-grid-layout-carousel kt-blocks-carousel \"><div class=\" kb-portfolio-grid-layout-carousel-wrap kt-post-grid-layout-carousel-wrap kt-carousel-arrowstyle-whiteondark kt-carousel-dotstyle-dark splide kb-blocks-portfolio-img-hover-zoomout kb-blocks-portfolio-content-hover-zoomin\" data-columns-xxl=\"3\" data-columns-xl=\"3\" data-columns-md=\"3\" data-columns-sm=\"2\" data-columns-xs=\"1\" data-columns-ss=\"1\" data-slider-center-mode=\"false\" data-slider-type=\"carousel\" data-slider-anim-speed=\"400\" data-slider-scroll=\"1\" data-slider-dots=\"true\" data-slider-arrows=\"true\" data-slider-hover-pause=\"false\" data-slider-auto=\"true\" data-slider-center-mode=\"false\" data-slider-speed=\"7000\" data-show-pause-button=\"false\" data-slider-gap=\"30\" data-slider-gap-tablet=\"30\" data-slider-gap-mobile=\"30\" data-slider-gap-unit=\"px\" data-item-selector=\".kb-portfolio-masonry-item\"><div class=\"kadence-splide-slider-init splide__track\"><ul><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:56.25%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-1024x576.png\" class=\"attachment-large size-large wp-post-image\" alt=\"An image of a lightbulb with the text Unlevered Beta Formula\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-lightbulb.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/unlevered-beta-formula\/\" aria-label=\"Unlevered Beta Formula &#8211; Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">Unlevered Beta Formula &#8211; Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:56.25%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-1024x576.png\" class=\"attachment-large size-large wp-post-image\" alt=\"A lightbulb and the words Purchase Price Allocation\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/01\/lightbulb-purchase-price-allocation.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/purchase-price-allocation\/\" aria-label=\"Purchase Price Allocation in 4 Steps &#8211; The Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">Purchase Price Allocation in 4 Steps &#8211; The Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><li class=\"kb-portfolio-slider-item kb-slide-item\"><div class=\"kb-blocks-portfolio-grid-item\"><div class=\"kb-blocks-portfolio-grid-item-inner-wrap kb-feat-image-align-none\"><div class=\"kadence-portfolio-image\"><div class=\"kadence-portfolio-image-intrisic kt-image-ratio-nocrop\" style=\"padding-bottom:45.138888888889%\"><div class=\"kadence-portfolio-image-inner-intrisic\"><img loading=\"lazy\" decoding=\"async\" width=\"720\" height=\"325\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1.png\" class=\"attachment-large size-large wp-post-image\" alt=\": A stick figure answering an interview question with the title text &#039;Walk Me Through an LBO&#039; below\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1.png 720w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-300x135.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-400x181.png 400w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-624x282.png 624w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-50x23.png 50w, https:\/\/finance-able.com\/wp-content\/uploads\/2021\/06\/0-Walk-Me-Through-a-DCF-Definitive-Guide-Cover-1-100x45.png 100w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><\/div><\/div><\/div><div class=\"kb-portfolio-grid-item-inner\"><a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\" aria-label=\"Walk Me Through a DCF in 5 Steps &#8211; The Ultimate Guide\" class=\"portfolio-hover-item-link\"><\/a><div class=\"kb-portfolio-overlay-color\"><\/div><div class=\"kb-portfolio-overlay-border\"><\/div><div class=\"kb-portfolio-content-item-inner\"><h3 class=\"entry-title kb-portfolio-loop-title\">Walk Me Through a DCF in 5 Steps &#8211; The Ultimate Guide<\/h3><\/div><\/div><\/div><\/div><\/li><\/ul><\/div><div class=\"clearfix\" style=\"clear:both\"><\/div><\/div><\/div><\/div><\/div>\n\n<\/div><\/div><\/div>\n<\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-unlevered-vs-levered-beta\" style=\"font-size:35px\">What Is Unlevered vs Levered Beta?<\/h2>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/stick-figure-confused-about-beta-1024x576.png\" alt=\"Stick figure confused about Levered and Unlevered Beta\" class=\"wp-image-55180\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/stick-figure-confused-about-beta-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/stick-figure-confused-about-beta-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/stick-figure-confused-about-beta-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/stick-figure-confused-about-beta.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Unlevered &amp; Levered Beta <\/strong>are <strong>critical concepts<\/strong> to master if you are <strong>aiming for (or working in) Finance<\/strong>.&nbsp;<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Generally, the concepts underlying <strong>Beta<\/strong> <strong>are often not well understood<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In this article, we will provide a variety of illustrations to <strong>make the concept clear<\/strong>.&nbsp;<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-beta-systematic-vs-unsystematic-risk\" style=\"font-size:26px\">Beta: Systematic vs Unsystematic Risk<\/h3>\n\n\n\n<p style=\"font-size:18.5px\">Before we dive into <strong>Unlevered Beta vs Levered Beta<\/strong>, let&#8217;s take a quick look at the <strong>differences between Systematic Risk and Unsystematic Risk<\/strong>, which is a critical concept underlying Beta.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"317\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/systematic-vs-unsystematic-risk-1024x317.png\" alt=\"An image showing the contrast between Systematic and Unsystematic Risk\" class=\"wp-image-55185\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/systematic-vs-unsystematic-risk-1024x317.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/systematic-vs-unsystematic-risk-300x93.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/systematic-vs-unsystematic-risk-768x238.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/systematic-vs-unsystematic-risk.png 1232w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-what-is-the-difference-between-systematic-and-unsystematic-risk\" style=\"font-size:26px\">What Is The Difference Between Systematic and Unsystematic Risk?<\/h4>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Systematic Risk<\/strong> is <strong>inherent<\/strong> to all companies rather than individual Companies. For example, a pandemic would be a systematic risk to all Companies.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Portfolio diversification does not mitigate Systematic Risk.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">On the other hand, <strong>Unsystematic Risk is a company-specific risk<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"304\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/SysVsUn-1024x304.png\" alt=\"Diagram showing differences between Systematic Risk and Unsystematic Risk\" class=\"wp-image-54789\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/SysVsUn-1024x304.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/SysVsUn-300x89.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/SysVsUn-768x228.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/SysVsUn-1536x456.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/SysVsUn-2048x608.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">A Company&#8217;s <strong>Levered Beta captures both Systematic and Unsystematic Risk<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\"><strong>Discounted Cash Flow Analysis<\/strong><\/a>, which is a core valuation approach, relies on the usage of <strong>Levered Beta<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">So, understanding how to <strong>calculate Levered Beta from Unlevered Beta<\/strong> (and vice versa) is <strong>critical if you work in Finance<\/strong>!<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Also, by understanding these concepts, you will be well-placed to better <a href=\"https:\/\/finance-able.com\/what-is-a-hedge-fund\/\"><strong>understand investing decisions in the overall stock market<\/strong><\/a>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-let-s-begin-with-unlevered-beta-aka-asset-beta\" style=\"font-size:26px\">Let\u2019s Begin With Unlevered Beta (aka &#8216;Asset Beta&#8217;)<\/h3>\n\n\n<!-- This site is converting visitors into subscribers and customers with OptinMonster - https:\/\/optinmonster.com :: Campaign Title: Unlevered Beta Formula - Obfuscation -->\n<div id=\"om-opqy0lnq7rs9jlvg5gev-holder\"><\/div>\n<script>(function(d,u,ac){var s=d.createElement('script');s.type='text\/javascript';s.src='https:\/\/a.omappapi.com\/app\/js\/api.min.js';s.async=true;s.dataset.user=u;s.dataset.campaign=ac;d.getElementsByTagName('head')[0].appendChild(s);})(document,130718,'opqy0lnq7rs9jlvg5gev');<\/script>\n<!-- \/ OptinMonster -->\n\n\n\n<p style=\"font-size:18.5px\">Unlevered Beta <strong>does not take into account the level of <a href=\"https:\/\/www.experian.com\/blogs\/ask-experian\/what-is-financial-leverage\/\" target=\"_blank\" rel=\"noreferrer noopener\">Financial Leverage<\/a> (i.e., Debt)<\/strong> and risk profile of a company.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-big-picture-1024x576.png\" alt=\"Diagram highlighting Unlevered Beta\" class=\"wp-image-55182\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-big-picture-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-big-picture-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-big-picture-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-big-picture.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">So, if we aren&#8217;t considering the financial risk, what we are left with is the <strong>root-level Business risk of a Company (i.e. the risk of a Company&#8217;s Assets\/Operations<\/strong>).<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In fancy terms, <strong>Unlevered Beta does not <\/strong>take into account the firm&#8217;s &#8216;<strong>Capital Structure<\/strong>&#8216; (i.e., the mix of Debt vs Equity)<strong>.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">This <strong>&#8216;root-level&#8217; view <\/strong>of a Company&#8217;s risk profile enables us to <strong>gauge the underlying risk of a Company, absent the impact of Debt.<\/strong><\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-now-let-s-look-at-levered-beta\" style=\"font-size:26px\">Now, Let&#8217;s Look at Levered Beta<\/h3>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Levered Beta depicts<\/strong> the Beta of a Company incorporating its Debt\/Equity mix. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/levered-beta-big-picture-1024x576.png\" alt=\"Diagram highlighting Levered Beta\" class=\"wp-image-55183\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/levered-beta-big-picture-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/levered-beta-big-picture-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/levered-beta-big-picture-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/levered-beta-big-picture.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">High levels of Debt generally increase riskiness. So, Analysts typically examine this view as well. <strong>All else equal, more Debt means more risk. <\/strong><\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-why-does-beta-matter\" style=\"font-size:35px\">Why Does Beta Matter?<\/h2>\n\n\n\n<p style=\"font-size:18.5px\">So, now you know what Beta is and the differences between <strong>Unlevered and Levered Beta<\/strong>, let&#8217;s take a closer look at what Beta actually is in the <strong>context of the Capital Asset Pricing Model (&#8216;CAPM&#8217;).<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">Essentially, the CAPM formula captures an<strong> investor&#8217;s expected rate of return relative to the level of risk taken.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">We want to calculate the <strong>Cost of Equity<\/strong>, so we start off with the <strong>Risk-Free Rate of Return<\/strong> with taking <strong>zero risk<\/strong> as the starting point.<\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"676\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/BetaGraphs-1024x676.png\" alt=\"Diagram showing Beta in the context of the Capital Asset Pricing Model or CAPM\" class=\"wp-image-54782\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/BetaGraphs-1024x676.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/BetaGraphs-300x198.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/BetaGraphs-768x507.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/BetaGraphs-1536x1013.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/BetaGraphs-2048x1351.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">Then, we add to that the reward for <strong>investing in the market<\/strong> above and beyond that risk-free rate. T<strong>his is where Beta kicks in.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">This <strong><a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=4066060\" target=\"_blank\" rel=\"noreferrer noopener\">Equity Risk Premium<\/a> <\/strong>can be <strong>dialed up or down by the Beta, based on the level of risk inherent in the underlying Company<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">For a Company with a higher <strong>Equity Beta, <\/strong>we would expect higher returns, because we are taking on a higher level of risk. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">Conversely, for a lower <strong>Equity Beta<\/strong> Company, we would expect lower returns.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>To keep it simple, increased risk should yield higher returns for investors.<\/strong><\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-unlevered-beta-formula\" style=\"font-size:35px\">The Unlevered Beta Formula<\/h2>\n\n\n\n<p style=\"font-size:18.5px\">To calculate the <strong>Unlevered Beta<\/strong> of a Company, we use the following formula: <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Unlevered Beta = Levered Beta \/ [1 + (1 &#8211; Tax Rate) x (Debt\/Equity)]<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-diagram-1024x576.png\" alt=\"\" class=\"wp-image-55187\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-diagram-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-diagram-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-diagram-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/unlevered-beta-formula-diagram.png 1280w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Don&#8217;t panic!<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">Although the formula may seem daunting at first,<strong> let&#8217;s take a step back and think about it for a second.<\/strong><\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" style=\"font-size:26px\"><strong>The Concept: Unlevered Beta to Levered Beta<\/strong><\/h3>\n\n\n\n<p style=\"font-size:18.5px\">We know that <strong>Unlevered Beta <\/strong>doesn&#8217;t account for any <strong>Debt<\/strong> <strong>(i.e., Capital Structure is ignored)<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">But investors need to consider the <strong>bigger picture of the Company&#8217;s situation, including the level of Debt.<\/strong> <\/p>\n\n\n\n<p style=\"font-size:18.5px\">So, if we want to know more about the whole picture, it&#8217;s useful to know <strong>how much of the Company is Debt and how much is Equity<\/strong> (or the <strong>Debt-to-Equity Ratio<\/strong>). <\/p>\n\n\n\n<p style=\"font-size:18.5px\">That&#8217;s what you&#8217;re seeing in the illustration above. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">This formula takes you from <strong>Equity Beta<\/strong> by accounting for the <strong>Debt-to-Equity Ratio<\/strong> and the <strong>Tax Rate<\/strong> to arrive at <strong>Unlevered Beta<\/strong>. <\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\" style=\"font-size:26px\">The Formula: Unlevered Beta to Levered Beta<\/h3>\n\n\n\n<p style=\"font-size:18.5px\">More mechanically, to calculate the <strong>Levered Beta<\/strong>, you start with the <strong>Unlevered Beta<\/strong> of a Company:<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Levered Beta = Unlevered Beta * [1 + (1 &#8211; Tax Rate) x (Debt\/Equity)]<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"600\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/UL-L-1024x600.png\" alt=\"Diagram showing the Levered Beta Formula\" class=\"wp-image-54783\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/UL-L-1024x600.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/UL-L-300x176.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/UL-L-768x450.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/UL-L-1536x900.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/UL-L-2048x1200.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">The <strong>Levered Beta<\/strong> is also called the &#8216;<strong>Equity Beta&#8217; of a Company<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Now, let&#8217;s talk about <strong>where Beta comes from in the first place!<\/strong><\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" style=\"font-size:35px\"><strong>The Root of Beta<\/strong><\/h2>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Beta<\/strong> <strong>is the output of a Regression Analysis <\/strong>that compares an Individual Company&#8217;s returns to the return of the aggregate Stock Market (typically the S&amp;P 500).<\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"719\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/StockGraph-1024x719.png\" alt=\"Diagram showing the relationship between the change in Stock Price vs the change in the value of the Stock Market.\" class=\"wp-image-54756\" style=\"width:757px;height:531px\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/StockGraph-1024x719.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/StockGraph-300x211.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/StockGraph-768x539.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/StockGraph-1536x1078.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/StockGraph-2048x1437.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p style=\"font-size:18.5px\">If you&#8217;re not mathematically inclined, the above simply shows the relationship between the <strong>change in Stock Price vs the change in the value of the Stock Market<\/strong>.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">In more mathematical terms, Beta is the slope of the line of the regression. <\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-calculate-beta-for-a-private-company\" style=\"font-size:35px\">How to Calculate Beta for a Private Company<\/h2>\n\n\n\n<p style=\"font-size:18.5px\">Everything above works great for a Publicly Listed Company. <\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>But what happens when you are asked to find the Beta of a Private Company?<\/strong><\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"524\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/4Steps-1-1024x524.png\" alt=\"Diagram showing the steps in calculating Beta for a Private Company\" class=\"wp-image-54787\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/4Steps-1-1024x524.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/4Steps-1-300x153.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/4Steps-1-768x393.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/4Steps-1-1536x785.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/4Steps-1-2048x1047.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"schema-how-to wp-block-yoast-how-to-block\"><p class=\"schema-how-to-description\">Here are the <strong>4 steps to find a Private Company&#8217;s Beta<\/strong>:<\/p> <ol class=\"schema-how-to-steps\"><li class=\"schema-how-to-step\" id=\"how-to-step-1679309892826\"><strong class=\"schema-how-to-step-name\">Find Peer Betas<\/strong> <p class=\"schema-how-to-step-text\">Find the Levered Betas of a group of peer companies in the same industry and ideally in the same sector.<\/p> <\/li><li class=\"schema-how-to-step\" id=\"how-to-step-1679309936716\"><strong class=\"schema-how-to-step-name\">De-Lever Peer Betas<\/strong> <p class=\"schema-how-to-step-text\"><strong>De-lever the industry peer Betas<\/strong> of the Publicly Listed Companies using the <strong>Unlevered Beta<\/strong> formula.<\/p> <\/li><li class=\"schema-how-to-step\" id=\"how-to-step-1679309943904\"><strong class=\"schema-how-to-step-name\">Take The Average or Median<\/strong> <p class=\"schema-how-to-step-text\">Calculate the <strong>Average or Median<\/strong> of the <strong>Unlevered Betas<\/strong> for the comparable companies.<\/p> <\/li><li class=\"schema-how-to-step\" id=\"how-to-step-1679310040015\"><strong class=\"schema-how-to-step-name\">Re-Lever With Current \/ Target Capital Structure<\/strong> <p class=\"schema-how-to-step-text\">Finally, for the subject company re-lever the Beta to go from the Company&#8217;s Unlevered Beta to its Levered Beta.<\/p> <\/li><\/ol><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>By re-levering Beta<\/strong>, you can now assess the Target Company&#8217;s risk profile using its publicly listed peers as a proxy.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Quick Note: If you don&#8217;t have sufficient information on the company&#8217;s Capital Structure, you can use <strong>average Peer Debt-To-Equity ratios<\/strong> as a proxy for the subject company&#8217;s market performance.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">By following the steps outlined above, you can obtain the<strong> Target Company&#8217;s Beta.<\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">Now, let&#8217;s see <strong>where we can find Beta in real life<\/strong>. <\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-source-beta\" style=\"font-size:35px\">How to Source Beta?<\/h2>\n\n\n\n<p style=\"font-size:18.5px\">If you&#8217;re <strong>on the job, Bloomberg, CapitalIQ, or Factset are your friends here<\/strong>. However, those platforms are incredibly expensive for individuals. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">But <strong>if you&#8217;re a student <\/strong>reading this, chances are you don&#8217;t have access to fancy Bloomberg terminals &#8211; but don&#8217;t panic. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">You can still access this information using <strong>Yahoo Finance or <\/strong><a href=\"https:\/\/www.koyfin.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Koyfin<\/strong><\/a><strong> (see example below)<\/strong>.<\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"501\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Koyfin-1024x501.png\" alt=\"Screenshot of a chart from Koyfin.com\" class=\"wp-image-54758\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Koyfin-1024x501.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Koyfin-300x147.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Koyfin-768x376.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Koyfin-1536x752.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Koyfin-2048x1003.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p style=\"font-size:18.5px\">With that covered, let us now take a look at <strong>how Beta shows up in Investment Banking and Private Equity Interviews<\/strong>. <\/p>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-common-unlevered-beta-interview-questions\" style=\"font-size:35px\">Common Unlevered Beta Interview Questions<\/h2>\n\n\n\n<p style=\"font-size:18.5px\">Questions about Beta are quite common in Finance interviews. In particular, if you are aiming for a <a href=\"https:\/\/finance-able.com\/investment-banking-career-path\/\"><strong>career in Investment Banking<\/strong><\/a>, this is a concept you would want to understand in detail. <\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"577\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Beta-Interview-image-1024x577.png\" alt=\"Stick figures illustrating an interviewer and an interviewee during a Finance interview\" class=\"wp-image-54788\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Beta-Interview-image-1024x577.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Beta-Interview-image-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Beta-Interview-image-768x433.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Beta-Interview-image-1536x866.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/Beta-Interview-image.png 1628w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p style=\"font-size:18.5px\">A few common interview questions are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><p><em>How would you go about calculating the Unlevered Beta for a private company?<\/em><\/p><\/li>\n\n\n\n<li><p><em>How does the total debt of a company affect its Beta?<\/em><\/p><\/li>\n\n\n\n<li><p><em>Which is more useful for investors, the Unlevered or Levered Beta?<\/em><\/p><\/li>\n<\/ul>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p style=\"font-size:18.5px\">To answer these questions, you will <strong>need to understand:<\/strong><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><p>Beta for a private company<\/p><\/li>\n\n\n\n<li><p>How debt impacts the risk of a company and how more debt impacts expected returns<\/p><\/li>\n\n\n\n<li><p>How investors use beta to assess a company&#8217;s risk profile<\/p><\/li>\n<\/ol>\n\n\n\n<p style=\"font-size:18.5px\">With all of this covered, let&#8217;s now wrap up our discussion on <strong>Beta<\/strong>.<\/p>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-wrap-up-unlevered-vs-levered-beta-formulas\" style=\"font-size:35px\">Wrap-Up: Unlevered vs Levered Beta Formulas<\/h2>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/AtDeskGood-1024x576.png\" alt=\"Stick figure reading about Unlevered vs Levered Beta Formulas on a desktop computer\" class=\"wp-image-54759\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/AtDeskGood-1024x576.png 1024w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/AtDeskGood-300x169.png 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/AtDeskGood-768x432.png 768w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/AtDeskGood-1536x865.png 1536w, https:\/\/finance-able.com\/wp-content\/uploads\/2023\/03\/AtDeskGood-2048x1153.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Hopefully<\/strong>, you now have a <strong>much better understanding of<\/strong> <strong>Unlevered Beta and Levered Beta<\/strong>. <\/p>\n\n\n\n<p style=\"font-size:18.5px\">As we discussed throughout this article, <strong>Beta is a critical measure of risk <\/strong>used throughout the Finance world.<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Beta is<\/strong> <strong>important<\/strong> because it tells you the sensitivity of the Security\/Asset to the overall (i.e. &#8216;systematic&#8217;) risk of the Stock Market.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">We hope you found this article helpful!<\/p>\n\n\n\n<p style=\"font-size:18.5px\"><strong>Let us know if you have any questions in the comments below. We\u2019d love to hear from you!<\/strong><\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" style=\"font-size:35px\"><strong>Video Review: Unlevered Beta Formula<\/strong><\/h2>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>Want a video overview of Unlevered Beta Formula?<\/em><\/strong><\/p>\n\n\n\n<p style=\"font-size:18.5px\">Check out this <strong>YouTube <\/strong><a href=\"https:\/\/youtu.be\/VLeWpz2EC2Q\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#4797dd\" class=\"has-inline-color\"><strong><span style=\"text-decoration: underline;\">Video Walkthrough<\/span><\/strong><\/mark><\/a><strong><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"> <\/mark><\/strong>of Unlevered Beta Formula <\/strong>from our Founder, Mike Kimpel, with a full walkthrough.<\/p>\n\n\n\n<p style=\"font-size:18.5px\">Also, check out our <a href=\"https:\/\/www.youtube.com\/channel\/UCu7i61GXqR08xc1WAgh9GkA\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong><span style=\"text-decoration: underline;\">YouTube Channel<\/span><\/strong><\/mark><\/a> for more Interview Question reviews and <a href=\"https:\/\/youtube.com\/playlist?list=PLJ2yVq7yYUT8u1j4SaSdk1tr-3dd62EuV\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><span style=\"text-decoration: underline;\">Finance Explainer Videos<\/span><\/mark><\/strong><\/a>, and follow us on <a href=\"https:\/\/www.instagram.com\/survivefinance\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Instagram<\/strong><\/a> for daily finance tips and tricks.<\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" style=\"font-size:35px\"><strong>About the Author<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"alignleft size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"500\" src=\"https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo.jpg\" alt=\"Picture of Mike Kimpel, Founder of Finance|able\" class=\"wp-image-26350\" style=\"width:266px;height:266px\" srcset=\"https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo.jpg 500w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-300x300.jpg 300w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-100x100.jpg 100w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-150x150.jpg 150w, https:\/\/finance-able.com\/wp-content\/uploads\/2020\/12\/MK-Photo-50x50.jpg 50w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/figure>\n<\/div>\n\n\n<p style=\"font-size:17px\"><a href=\"https:\/\/finance-able.com\/about-us\/\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><span style=\"text-decoration: underline;\">Mike Kimpel<\/span><\/mark><\/strong><\/a> is the <strong>Founder and CEO<\/strong> of <strong>Finance|able<\/strong>, a next-generation Finance Career Training platform. Mike has worked in Investment Banking, Private Equity, Hedge Fund, and Mutual Fund roles during his career.<\/p>\n\n\n\n<p style=\"font-size:17px\">He is an <strong>Adjunct Professor<\/strong> in <strong>Columbia Business School&#8217;s <a href=\"https:\/\/business.columbia.edu\/heilbrunn\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><span style=\"text-decoration: underline;\">Value Investing Program<\/span><\/mark><\/a><\/strong> and leads the Finance track at <a href=\"https:\/\/www.accessdistributed.org\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong><span style=\"text-decoration: underline;\">Access Distributed<\/span><\/strong><\/mark><\/a>, a non-profit that creates access to top-tier Finance jobs for students at non-target schools from underrepresented backgrounds.<\/p>\n\n\n\n<div class=\"wp-block-kadence-icon kt-svg-icons kt-svg-icons54724_018eaf-1f alignnone\">\n<div class=\"wp-block-kadence-single-icon kt-svg-style-default kt-svg-icon-wrap kt-svg-item-54724_d2992e-cb\"><a href=\"https:\/\/www.linkedin.com\/in\/mikekimpel\/\" class=\"kt-svg-icon-link\" target=\"_blank\" rel=\"noopener noreferrer\"><span class=\"kb-svg-icon-wrap kb-svg-icon-fa_linkedin\"><svg viewBox=\"0 0 448 512\"  fill=\"currentColor\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"  role=\"img\"><title>Mike Kimpel LinkedIn<\/title><path d=\"M416 32H31.9C14.3 32 0 46.5 0 64.3v383.4C0 465.5 14.3 480 31.9 480H416c17.6 0 32-14.5 32-32.3V64.3c0-17.8-14.4-32.3-32-32.3zM135.4 416H69V202.2h66.5V416zm-33.2-243c-21.3 0-38.5-17.3-38.5-38.5S80.9 96 102.2 96c21.2 0 38.5 17.3 38.5 38.5 0 21.3-17.2 38.5-38.5 38.5zm282.1 243h-66.4V312c0-24.8-.5-56.7-34.5-56.7-34.6 0-39.9 27-39.9 54.9V416h-66.4V202.2h63.7v29.2h.9c8.9-16.8 30.6-34.5 62.9-34.5 67.2 0 79.7 44.3 79.7 101.9V416z\"\/><\/svg><\/span><\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-frequently-asked-questions\" style=\"font-size:35px\">Frequently Asked Questions<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1679317811193\"><strong class=\"schema-faq-question\"><p><strong>What is Unlevered Beta?<\/strong><\/p><\/strong> <p class=\"schema-faq-answer\"><p><strong>Unlevered Beta is a measure of a Company&#8217;s Business\/Operational risk.<\/strong> It doesn&#8217;t take into account the Financial Leverage and Capital Structure of a Company.<\/p><\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1679317843923\"><strong class=\"schema-faq-question\"><p><strong>How to calculate the Unlevered\/Asset Beta?<\/strong><\/p><\/strong> <p class=\"schema-faq-answer\"><p><strong>Asset Beta<\/strong>, also known as <strong>Unlevered Beta<\/strong>, can be found by taking the Levered Beta and dividing it by [1 + (1 &#8211; tax rate) x (debt\/equity)]. The Levered Beta can be found using on-the-job resources like Bloomberg or from other resources like <a href=\"https:\/\/www.koyfin.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Koyfin<\/strong><\/a><span style=\"font-size: revert; color: var(--global-palette4);\">.<\/span><\/p><\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1679317892773\"><strong class=\"schema-faq-question\"><p><strong>What are Levered and Unlevered Beta?<\/strong><\/p><\/strong> <p class=\"schema-faq-answer\"><p><strong>Levered and Unlevered Beta are both measures of the Risk Profile of a Company.<\/strong> <strong>Levered Beta<\/strong> takes into account the Financial Leverage \/ Capital Structure of a firm. <strong>Unlevered Beta<\/strong> purely measures the Business \/ Market Ris<span style=\"color: var(--global-palette4);\">k.<\/span><\/p><\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1679317914617\"><strong class=\"schema-faq-question\"><p><strong>What is Asset Beta?<\/strong><\/p><\/strong> <p class=\"schema-faq-answer\"><p>Asset Beta, also known as Unlevered Beta, is an assessment of the Business Risk of a Company <strong>without taking into account its Capital Structure<\/strong>.<\/p><\/p> <\/div> <\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-related-links\" style=\"font-size:35px\">Related Links<\/h2>\n\n\n\n<ul class=\"wp-block-yoast-seo-related-links yoast-seo-related-links\">\n<li><strong><a href=\"https:\/\/finance-able.com\/walk-me-through-a-dcf\/\">Walk Me Through a DCF<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"https:\/\/finance-able.com\/investment-banking-career-path\/\">Investment Banking Career Path<\/a><\/strong><\/li>\n\n\n\n<li><a href=\"https:\/\/finance-able.com\/treasury-stock-method\/\"><strong>Treasury Stock Method<\/strong><\/a><\/li>\n<\/ul>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/finance-able.com\/\">Home<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\">Unlevered Beta Formula &#8211; Ultimate Guide<\/span><\/span><\/div><style class=\"advgb-styles-renderer\">.kb-table-of-content-nav.kb-table-of-content-id_fabc14-6f .kb-table-of-content-wrap{margin-top:42px;margin-right:42px;margin-bottom:42px;margin-left:42px;padding-top:10px;padding-right:10px;padding-bottom:10px;padding-left:10px;background-color:#f4f4f4;border-top:3px solid currentColor;border-right:3px solid currentColor;border-bottom:3px solid currentColor;border-left:3px solid currentColor;border-top-left-radius:20px;border-top-right-radius:20px;border-bottom-right-radius:20px;border-bottom-left-radius:20px;}.kb-table-of-content-nav.kb-table-of-content-id_fabc14-6f 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            "text": "<p><strong>Asset Beta<\/strong>, also known as <strong>Unlevered Beta<\/strong>, can be found by taking the Levered Beta and dividing it by [1 + (1 - tax rate) x (debt\/equity)]. The Levered Beta can be found using on-the-job resources like Bloomberg or from other resources like <a href=\"https:\/\/www.koyfin.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Koyfin<\/strong><\/a>.<\/p>",
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            "text": "<p><strong>Levered and Unlevered Beta are both measures of the Risk Profile of a Company.<\/strong> <strong>Levered Beta<\/strong> takes into account the Financial Leverage \/ Capital Structure of a firm. <strong>Unlevered Beta<\/strong> purely measures the Business \/ Market Risk.<\/p>",
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            "text": "<p>Asset Beta, also known as Unlevered Beta, is an assessment of the Business Risk of a Company <strong>without taking into account its Capital Structure<\/strong>.<\/p>",
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