brandon is an analyst at a wealth managment firm. one of his clients holds a $5000 portfolio that consists of four stocks.

brandon calculated the portfolios beta as .818 and the portfolios required return as 8.4990%.

brandon recommends replacing atteric incs 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%.

1. according to brandons recommendation, assuming that the market is in equilibrium, how much will the portfolios required return change?

2. brandon expects a return of 6.13% from the portfolio with the new weights. does he think that the required return as compared to expected is undervalued, overvalued or fair?

3. suppose instead of replacing atteric incs stock with baque cos stock brandon consideres replacing atterics stock with the equal dollar allocation to shares of company x's stock that has a higher beta than atteric. if everything else remains constant, the portfolios beta would increase or decrease?

Stock Investment Allocation Beta Standard Deviation 38.00% Atteric Inc. (AI) 35% 0.750 Arthur Trust Inc. (AT) 20% 1.500 42.00% 15% 1.100 45.00% Li Corp. (LC) Baque Co. (BC) 30% 0.300 49.00%