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6. Portfolio beta and weights Aa Aa Rafael is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that

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6. Portfolio beta and weights Aa Aa Rafael 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: Investment Standard Stock Allocation Beta Deviation Atteric Inc. (AI) 35% 0.900 23.00% Arthur Trust Inc. (AT) 20% 1.600 27.00% Lobster Supply Corp. (LSC) 15% 1.100 30.00% Baque Co. (BC) 0.300 30% 34.00% Rafael calculated the portfolio's beta as 0.890 and the portfolio's expected returm as 12.68%. 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 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? O 1.96 percentage points. O 1.23 percentage points O 1.82 percentage points O 1.58 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, of 9.60% from the portfolio

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