Rafael 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: Stock Atteric Inc. (AI) Arthur Trust Inc. (AT) Lobster Supply Corp. (LSC) Baque Co. (BC) Investment Allocation 0.9548 percentage points O 0.7700 percentage points 0.6006 percentage points 0.8855 percentage points 35% Overvalued 20% O Fairly valued 15% 30% Undervalued Beta 0.900 1.500 1.200 Rafael calculated the portfolio's beta as 0.945 and the portfolio's required return as 9.1975%. 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%. 0.500 According to Rafael's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Do not round your intermediate calculations.) Standard Deviation 53.00% 57.00% 60.00% 64.00% 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 6.93% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued?

Rafaet is on 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 frem each stock is given in the following table: Fufael calculated the portfolio's beea as 0.945 and the portfolo's required return as 9.1975%. Fataet thinks it wa be a good idea to realiocate the hunds in his client's portfollo. He recommends replacing Atteric Inc's shares with the same amount in additional shares of Baque Co. The risk-free rate is 44%, and the market risk premium is 5.504 . Accorcing to Rafael's recommendation, assuming that the market is in equilorium, how much will the portfolio's recuired return change? (Note: Do not round your intermediate caiculatiens:) 0.954t percentage points 0.7700 percentage points 0.6006 percentage points Q. 6 ess petcentage peints Aneirats' estimates on expected refums from ecuify investments are based on several factors. These estimatiant alse often indude subjective and Judgmental factors, becaute different aneris interpret data in different wars: Suppese, based on the earnings consensus of stock analysts, Matael expects a return of 6.93 \% trom the portfolio with the new weights. Does he think that the required return as cempared to expected refurns is undervalued, overvalued, or fairly valued? Overvalued Fairly valued Undervalued O Undervalueo