Colum

manet_5 Wrote:
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> schweser PE2 P.53 12.2
>
> the answer says,
>
> "the weighted average asset beta for the plan,
> assuming debt securities have zero beta,
> is usually less than that for the sponsoring
> firm's operating assets, so combining the firm's
> and plan's assets usually produces a lower WACC."
>
> plan's beta is usually less than firm's operating
> beta ?
> Is this usually the case ?
>
> CFAI R22 Table3 represents
> "operating assets beta is 0.36, while pension
> assets beta is 0.60..."


Yes; plan beta is usually less than firm op. beta b/c plan typically holds more fixed income securities than equity.