Eileen is an analyst at a wealth management firm. One of her clients holds a $5,000 portfolio that consists of four stocks. The investment aliocation in the portfolio along with the contribution of risk from each stock is given in the following table: Eileen caiculated the portfolio's beta as 0.875 and the portfolio's expected return as 12.5690. Eileen thinks it will be a good idea to realiocate the funds in her client's portfolio. She recommends replacing Atteric Incis shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 6.00%, and the tharket risk premium is 7.50k. According to Elleen's recommendation, assuming that the markot is in equilibrium, how much will the portfollo's required return change? According to Elleen's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.20%0.30060.26%0.3296 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, Eileen expects a return of 12.29% from the portfolio with the new welghts. Does he. think that the revised portfolio, based on the changes he recommended, is undervalued, overvalued, or fairly valued? Falrly valued Undervalued Overvalued Suppose instead of replacing Atteric incis stock with Transfer Fuels Cois stock, Elleen considers replacing Atteric Incis stock with the equal dollar allocation to shares of Company X2 s stock that has a higher beta than Atteric Inc.. If everything else remains constant, the portfolio's beta would Eileen is an analyst at a wealth management firm. One of her clients holds a $5,000 portfolio that consists of four stocks. The investment aliocation in the portfolio along with the contribution of risk from each stock is given in the following table: Eileen caiculated the portfolio's beta as 0.875 and the portfolio's expected return as 12.5690. Eileen thinks it will be a good idea to realiocate the funds in her client's portfolio. She recommends replacing Atteric Incis shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 6.00%, and the tharket risk premium is 7.50k. According to Elleen's recommendation, assuming that the markot is in equilibrium, how much will the portfollo's required return change? According to Elleen's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.20%0.30060.26%0.3296 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, Eileen expects a return of 12.29% from the portfolio with the new welghts. Does he. think that the revised portfolio, based on the changes he recommended, is undervalued, overvalued, or fairly valued? Falrly valued Undervalued Overvalued Suppose instead of replacing Atteric incis stock with Transfer Fuels Cois stock, Elleen considers replacing Atteric Incis stock with the equal dollar allocation to shares of Company X2 s stock that has a higher beta than Atteric Inc.. If everything else remains constant, the portfolio's beta would
