Suppose, based on the earnings consensus of stock analysts, Brandon expects a return of 6.85% 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?

a. 0.4840 percentage points

b. Project is overvalued

c. Required return from the portfolio would increase.

Explanation:

Note: The full question is attached as picture

New Allocation on Transfer Fuels corporation = 30%+35%

New Allocation on Transfer Fuels corporation = 65%

Beta after the new allocation = (20%*1.50) + (15%*1.10) + (65%*0.5)

Beta after the new allocation = 0.3 + 0.165 + 0.325

Beta after the new allocation = 0.79

New Required rate = Risk free rate + Beta* Market risk premium

New Required rate = 4%+ 0.79*5.5%

New Required rate = 4% +  4.345%

New Required rate = 8.345%

Hence, the change in required rate = 8.829% - 8.345% = 0.4840% . In this case, the project is overvalued if Brandon expects 6.85% . If Higher beta is chosen the portfolio risk would increase and required return from the portfolio would increase.

idk the answer so dont listen to me but 23

answer; at prices that violate government price regulations;