CENGAGE | MINDTAP Q Search this course mapter 8 Assignment Beth is an analyst at a wealth management firm. One of her dients 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 359 Beta 0.600 Standard Deviation 0,38% Atteric Inc. Arthur Inc. 20% 1.400 0.42% 15% 1.100 Lobster Supply Corp. Baque Co. 0.45% 0.49% 30% 0.500 Beth calculated the portfolio's beta as 0.805 and the portfolio's expected return as 12.04% Beth thinks it will be a good idea to reallocate the funds in her client's portfolio. She recommends replacing Atteric Inc.'s shares with the same amount In additional shares of Baque Co. The risk free rate is 6.00%, and the market risk premium is 7.50% According to Beth's recommendation, assuming that the market is in equilibrium, how much will the portiollo's required return change? 0.2094 00:32 0.26% 0:30 2:39 PM Q Search this course Chapter 8 Assignment O 0.32% O 0.26% O 0.30% A- 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. Beth expects a return of 11.80% from the portfolio with the new weights. Does he think that the revised portfolio, based on the changes he recommended, is undervalued, overvalued, or fairty valued? Undervalued Fairly valued Overvalued Suppose instead of replacing Atteric Inc s stock with Bague Cos stockBeth considers replacing atterle Inc. stock with the con dollar alocation to shares of Company X's stock that has a higher beta than Atterie Inc. If everything else remains contact the required return from the portfolio would Grade It Now Save & Continue conotice without saving ARG 42PM