12. Portfoliobeta and weights Gilberto is an analyst at a wealth management firm. One of his clients holds a $5,000 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 Arthur Inc u Corp Baque Co Investment Allocation Beta Standard Deviation 35% 0.900 0.53% 20% 1.500 0.57% 159 1.100 0.60% 30 0.500 0.04 Giberto calculated the portfolios beta as 0.930 and the portfolios expected return as 9.12% Gilberto thinks it will be a good idea to reallocate the funds in his dient's portfolio. He recommends replacing Atterle Incshares with the same amount in additional shares of Baque Co. The risk-free rate is 4.00%, and the market risk premium is 5.50% According to Gilberto's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? According to Glberto's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.60% 0.72 0.95% 0.89 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, Gilberto expects a return of 8.37% from the portfolio with the new weights. Does he think that the revised portfolio, based on the a changes be recommended, is undervalued, overvalued, or fairly valued? Fairly valued Undervalued Overvalued Suppose instead of replacing Atteric inc's stock with Bague Co.'s stock, Gilberto considers replacing Atteric Inc. 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