a. Johnny holds the following portfolio: Stock Investment Beta A $150,000 1.40 B $50,000 0.80 C...

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!!!

Expert Solution

jeff jeffy answered 2 years ago

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