The total market value of the stock of the bank of america company is $8 million, and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock is currently 1.5 and that the expected risk premium on the market is 6%. The Treasury bill rate is 2%. Assume for simplicity that bank of america debt is risk-free and the company does not pay tax. Suppose the company wants to diversify into the manufacture housing projects. The beta of unleveraged manufacturers is 2.

What is the required return of bank of americas new venture?

Answer choices:

10%

10.9%

5.3%

9.4%

19.4%

8.9%

5.8&

8.5%