Beta Ch 08: Assignment - Risk and Rates of Return Stock Investment Allocation Atteric Inc. (AL) 35% Arthur Trust Inc. (A

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Beta Ch 08 Assignment Risk And Rates Of Return Stock Investment Allocation Atteric Inc Al 35 Arthur Trust Inc A 1 (47.32 KiB) Viewed 32 times

Beta Ch 08: Assignment - Risk and Rates of Return Stock Investment Allocation Atteric Inc. (AL) 35% Arthur Trust Inc. (AT) 20% u Corp. (LC) 15% Transfer Fuels Co. (TF) 30% Standard Deviation 23.0095 0.900 1.400 1.100 0.300 27.009 30.0096 34.00% Rafael calculated the portfolio's beta as 0.850 and the portfolio's required return as 3.6750%. Rafael thinks it will be a good idea to reallocate the funds in his dient'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 4%, and the market risk premium is 5.50%. 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.) O 1.4322 percentage points 1.1550 percentage points 0.9009 percentage points O 1.3283 percentage points 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 6.02% 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? Undervalued Overvalued Fairly valued Suppose instead of replacing Atteric Inc.'s stock with Transfer Fuels Co.'s stock, Rafael 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