Question
a. Johnny holds the following portfolio: Stock Investment Beta A $150,000 1.40 B $50,000 0.80 C $100,000 1.00 D $75,000 1.20 Johnny plans to sell
a. Johnny holds the following portfolio:
| Stock | Investment | Beta |
| A | $150,000 | 1.40 |
| B | $50,000 | 0.80 |
| C | $100,000 | 1.00 |
| D | $75,000 | 1.20 |
Johnny plans to sell Stock A and replace it with Stock E, which has a beta of 0.75. By how much will the portfolio beta change? (Please state your answer in 2 decimal points)
b. Data for KeyKay Industries is shown below. Now KeyKay acquires some risky assets that cause its beta to increase by 30%. In addition, expected inflation increases by 2.00%. What is the stock's new required rate of return?
Initial beta 1.00 Initial required return (rs) 10.20% Market risk premium, RPM 6.00% Percentage increase in beta 30.00% Increase in inflation premium, IP 2.00%
THIS IS MY FINAL ASSIGMNET PLEASE, I BEG OF YOU. HELP ME! I NEED YOUR HELP! Please try to answer fully and correctly with full details. YOU ARE MY LAST CHANCE TO TAEK GOOD MARK, YOU ARE MY HERO! THANK YOU A LOT! AND GOD BLESS YOU!!!
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