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9. Portfolio beta and weights Rafael is an analyst at a wealth management firm. One of his 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 Investment Allocation Beta Standard Deviation Atteric Inc. (A1) 35% 0.600 53.00% Arthur Trust Inc. (AT) 20% 1.400 57.00% Li Corp. (LC) 15% 1.200 60.00% Baque Co. (BC) 30% 0.400 64.00% Rafael calculated the portfolio's beta as 0.790 and the portfolio's required return as 11.9250%. 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? (Note: Do not round your intermediate calculations.) 0.5250 percentage points 0,6038 percentage points O 0.6510 percentage points O 0.4095 percentage points Ch 08: Assignment - Risk and Rates of Return According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Do not round your intermediate calculations.) 0.5250 percentage points 0.6038 percentage points 0.6510 percentage points: O 0.4095 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. Suppose, based on the earnings consensus of stock analysts, Rafael expects a return of 12.90% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued? Undervalued Overvalued Fairly valued decrease increase Suppose instead of replacing Atteric Inc.'s stock with Baque Co.'s stock, Rafael considers replacing Atteric Inc.'s stock with the equal shares of Company X's stock that has a higher beta than Atteric Inc. If everything else remains constant, the portfolio's beta would ation to