According to Lorenzo’s recommendation, assuming that the market is in equilibrium, the portfolio’s required return will change by .

Lorenzo calculated the portfolio’s beta as 0.815 and the portfolio’s expected return as 12.11%.
Lorenzo 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 Transfer Fuels Co. The risk-free rate is 6.00%, and the market risk premium is 7.50%.
According to Lorenzo’s recommendation, assuming that the market is in equilibrium, the portfolio’s required return will change byimage    .
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, Lorenzo expects a return of 11.32% from the portfolio with the new weights. Does he think that the revised portfolio, based on the changes he recommended, is undervalued, overvalued, or fairly valued?
Suppose instead of replacing Atteric Inc.’s stock with Transfer Fuels Co.’s stock, Lorenzo 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 required return from the portfolio wouldimage    .

Step by step solution:

Business

You might also like to view...

Strategic alliances are

A. another name for joint ventures. B. partnerships between competitors, customers, or suppliers that may take various forms. C. arbitration. D. another name for a growth triangle.

View
Business

Skipper's Souvenir Shop had comparative balance sheets and income statements that showed the following information for 2010 and 2011: Inventory - 12/31/10 $100,000 Inventory - 12/31/11 85,000 Accounts payable - 12/31/10 20,000 Accounts payable - 12/31/11 15,000 Cost of goods sold - 2011 700,000 Skipper's accounts payable balances are composed solely of amounts due to suppliers for purchases of

inventory. What is the amount of cash payments for inventory that Skipper should report on its 2011 statement of cash flows assuming that the direct method is used? A) $690,000 B) $710,000 C) $850,000 D) $550,000

View
Business

Parchova is a multinational company that manufactures and sells stationery products. Customers who buy five or more products at a time from its retail outlets are given a notepad and a pen for free. In the context of customer relationship management, Parchova most likely establishes _____ with its customers.

A. limited relationships B. partial partnerships C. full partnerships D. distinct relationships

View
Business

Berkshire Hathaway Inc., a large conglomerate holding company, owns a several insurance companies, a large chain of jewelry stores, and has recently purchased the BNSF Railway. Berkshire Hathaway uses a market penetration strategy.

Answer the following statement true (T) or false (F)

View
Business