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

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7. Portfolio beta and weights Brandon 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: Arandon calculated the portfolio's beta as 0.818 and the portfolio's required return as 8.4990%. Brandon thinks it will be a good idea to reallocate the funds in his dient's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Baque 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 equillbrium, how much will the portfolio's required return change? (Note: Do not round your intermediate calculations.) 0.8690 percentage points 0.9994 percentage points 0.6778 percentage points 1.0776 percentage points Analysts' estimates on expected returns from equity investments are based on several factors. These estimations also often indude subjective and judgmental factors, because different analysts interpret data in different ways. Sugpose, based on the earninos consensus of stock analysts, Brandon expects a return of 6.13% from the portfolio with the new weights. Does he think that the required retum as compared to expected returns is undervalued, overvalued, of failfy valued? Fairly valued Undervalued Overvalued Analysts' extimates 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 eamings consensus of stock analysts, Brandon epects a return of 6.13m from the portfolio with the new weights, Does he think that the required retum as compared to expected returns is undervilued, overvalued, or faltly valued? Falty valued Undervalued Overvilued Suppose instead of replading Atteric inc,'s stock with Baque cois stock, Branden conslders rephaging Atteric foc. stock with the equal dollar allocation. to shares of Company XEs stock that has a Bigher beta than Atteric inc. If iverything else remains constant, the portfoloos beta would

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