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6. Portfolio beta and weights Rafael is an analyst at a wealth management firm. One of his cilents 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 foliowing table: Rafael calculated the portfolio's beta as 0.828 and the portfolio's expected return as 12.21%6. Rafael thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Incis shares with the same amount In additional shares of Baque Co. The risk-free rate is 6%, and the market risk premium is 7.50%. According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 1.46 percentage points 0.92 percentage points 1.36 percentage points 1.18 percentage points Analysts' estimates on expected returns from equity investments are based on sqveral 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, Rafoel expects a return of 9.53% 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 overvalued Fairly valued Suppose instead of replacing Atteric Inc.'s stock with Baque Co.'s stock, Rafoel considers replacing Atteric Incis 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 constent, the portfolio's beta would