Ariel holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Stock Investment Beta Standard Deviation Andalusian Limited (AL) $3,500 0.80 15.00% Kulatsu Motors Co. (KMC) $2,000 1.50 12.00% Western Gas & Electric Co. (WGC) $1,500 1.20 16.00% Makissi Corp. (MC) $3,000 0.50 22.50% Suppose all stocks in Ariel's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Kulatsu Motors Co. 0 Andalusian Limited Western Gas & Electric Co. Makissi Corp. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of standalone risk? o Kulatsu Motors Co. Makissi Corp. o Western Gas & Electric Co. Andalusian Limited If the risk-free rate is 4% and the market risk premium is 6%, what is Ariel's portfolio's beta and required return? Fill in the following table: Beta Required Return Ariel's portfolio Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 23.00% Arthur Trust Inc. (AT) 20% 1.400 27.00% Li Corp. (LC) 15% 1.300 30.00% Baque Co. (BC) 30% 0.400 34.00% Rafael calculated the portfolio's beta as 0.8575 and the portfolio's expected return as 8.72%. 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 4%, and the market risk premium is 5.50%. According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Round your intermediate calculations to two decimal places.) 0.84 percentage points O 0.53 percentage points O 0.68 percentage points O 0.78 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 6.54% 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? O Fairly valued Overvalued Undervalued increase Suppose instead of replacing Atteric Inc.'s stock with Baque Co.'s stock, Rafael considers higher beta than Atteric Inc. If everything else remains constant, the portfolio's beta would decrease Jeric Inc.'s stock with the equal dollar allocation to shares of Company X's stock that has a and the required return from the portfolio would
