HB Harvard Business Publishinc B Chapter 7- MBAD-503-01 - b My Questions | bartleby MindTap Cengage Lea X HB X K Ahttps://ng.cengage.com/static/nb/ui/evo/index.html?elSBN=9781337900010&id- 5432476578snapshotld=1286803& CENGAGE MINDTAP Q Search this course X Ch 08: Assignment - Risk and Rates of Return 6. Portfolio beta and weights Aa మా Brandon is an analyst at a wealth management firm. One of his clients holds a $7,500 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: A-Z Standard Investment Allocation Beta Deviation Stock Atteric Inc. (AI) 38.00% 35% 0.900 Office Arthur Trust Inc. (AT) 20% 1.400 42.00% Li Corp. (LC) 1.200 15% 45.00% Transfer Fuels Co. (TF) 0.400 30% 49.00% Brandon calculated the portfolio's beta as 0.895 and the portfolio's expected return as 8.92% Brandon 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 Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50% According to Brandon's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? O 1.10 percentage points O 0.75 percentage points O 0.96 percentage points O 1.19 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, Brandon expects a return of 6.46% from the portfolio + HB Harvard Business Publishinc B Chapter 7- MBAD-503-01 - b My Questions | bartleby MindTap Cengage Lea X HB X K Ahttps://ng.cengage.com/static/nb/ui/evo/index.html?elSBN=9781337900010&id- 5432476578snapshotld=1286803& CENGAGE MINDTAP Q Search this course X Ch 08: Assignment - Risk and Rates of Return According to Brandon's recommendation, assuming that the market is in equilibrium, how much will the portfolio's మా required return change? O 1.10 percentage points O 0.75 percentage points O 0.96 percentage points O 1.19 percentage points A-Z Office 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, Brandon expects a return of 6.46% from the portfolio with the new weights. Does he think that the revised portfolio, based on the changes he recommended, is undervalued, overvalued, or fairly valued? O Fairly valued O Overvalued O Undervalued Suppose instead of replacing Atteric Inc.'s stock with Transfer Fuels Co.'s stock, Brandon considers replacing Atteric 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 portfolio's risk would Screenshot saved The screenshot was added to your Flash Player WIN 32,0,0,255 Q3 3.34.1 2004-2016 Aplia. All rights reserved. O 2013 Cengage Learning except as noted. All rights reserved. Grade It Now Save & Continue OneDrive. One Drive Continue without saving +