Company A and Company B want to merge. A has an equity beta of 1.34 and 43% of its capital structure is equity. B has an equity beta of 1.95 and 36% equity in its structure.

1) Calculate the asset betas of A and B.

2) If they merge, what would the asset beta of the combined company be if A has total assets of $2 billion and B has $500 million? (portfolio beta = weighted average of constituents)

3) If the resulting company funded itself with $1 billion in debt and $1.5 billion equity, what would the new equity beta be?