12. Portfoliobeta and weights Poornima is an analyst at a wealth management firm. One of her 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: Stock Atteric Inc. Beta Investment Allocation 35% 0.900 Standard Deviation 0.53% 0.57% 20% Arthur Inc Lobster Supply Corp. 1.600 15% 1.100 Baque Co. 0,60% 0.649 30% 0.300 Poornima calculated the portfolio's beta as 0.890 and the portfolio's expected return as 8.90%. Poornima thinks it will be a good idea to reallocate the funds in her client's portfolio. She recommends replacing Atteric Inc's shares 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 Poornima's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 1.33% 0.90% O 1.4496 1.169 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 Poornima expects a return of 7.73% 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? Undervalued Analysts' estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and fudgmental factors, because different analysts interpret data in different ways. Suppose, based on the earnings consensus of stock analysts, Poornima expects a return of 7.73% 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? Undervalued Fairly valued Overvalued Suppose instead of replacing Atteric Inc.'s stock with Baque Co.'s stock, Poornima 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 beta would and the required return from the portfolio would