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Gregory is an analyst at a wealth management firm. One of his clients holds a...

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Accounting

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Gregory is an analyst at a wealth management firm. One of his clients 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: Investment Allocation 35% Stock Atteric Inc. (AI) Arthur Trust Inc. (AT) Li Corp. (LC) Baque Co. (BC) Standard Deviation 53.00% 57.00% 60.00% 64.00% Beta 0.600 1.600 1.200 0.500 20% 15% 30% Gregory calculated the portfolio's beta as 0.860 and the portfolio's expected return as 12.45% Gregory 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 6%, and the market risk premium is 7.50%. According to Gregory's recommendation, assuming that the market is in equilibrium, how much will the portfolio's! required return change? O O O O 0.32 percentage points 0.30 percentage points 0.26 percentage points 0.20 percentage points

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