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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
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: Brandon calculated the portfolio's beta as 0.815 and the portfolio's expected return as 12.11%. Brandon 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 Transfer Fuels Co. The risk-free rate is 6%, and the market risk premium is 7.50%. According to Brandon's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.52 percentage points 0.65 percentage points 0.41 percentage points 0.60 percentage points Suppose instead of replacing Atteric Inc.'s stock with Transfer Fuels Co.'s stock, Brandon considers replacing Atteric Inc.'s 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 constant, the portfolio's beta would and the required return from the portfolio would ___
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