1. KAREN Art Photo would have an equity beta of 1.25 if it was all equity financed. The market value information for the company is shown here: Market Value Debt 1,400,000 Equity 2, 600, 000 The expected return on the market portfolio is 12.40 per cent, and the risk free rate is 5.3 per cent. The company is subject to a corporate tax rate of 28 percent. Assume the beta of the debt is zero. a. What is Karen's unlevered cost of equity capital? b. What is the required rate of return on the company's equity? 2. Today is Fabio's 5th birthday. His father intends to start saving a fixed amount every month for his university. He will start saving at the end of this month. He will each time place these savings in a bank account that pays an interest of 4 percent per annum with monthly compounding. Will there be 200 times as much as one monthly payment accumulated on the bank account by Fabio's 18th birthday? Show your working.