the required return from the portfolio would increase/ decrease

Search V Ch 08: Assignment - Risk and Rates of Return 9. Portfolio beta and weights Rafael is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Atteric Inc. (AT) Arthur Trust Inc. (AT) Li Corp. (LC) Investment Allocation 35% 20% Beta Standard Deviation 0.600 38.00% 1.600 42.00% 15% 1.300 45.00% 49.00% Baque Co. (BC) 30% 0.400 Rafael calculated the portfolio's beta as 0.845 and the portfolio's required return as 8.6475%. Rafael thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Do not round your intermediate calculations.) 0.3003 percentage points 0.4774 percentage points 0.4428 percentage points 0.3850 percentage points Ch 08: Assignment - Risk and Rates of Return According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Do not round your intermediate calculations.) 0.3003 percentage points 0.4774 percentage points 0.4428 percentage points 0.3850 percentage points Analysts' estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and judgmental factors, because different analysts interpret data in different ways. Suppose, based on the earnings consensus of stock analysts, Rafael expects a return of 6.76% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued? Overvalued Fairly valued Undervalued Suppose instead of replacing Atteric Inc.'s stock with Baque Co's stock, Rafael considers replacing Atterie Inc.'s stock with the equal dollar allocation to shares of Company X's stock that has a higher beta than Atteric Inc. If everything else remains constant, the required return from the portfolio would Grade It Now Save & Continue Continue without saving