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Eric is an analyst at a wealth management firm. One of his cients holds a $5,000 the portfolio along with the contribution of risk from

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Eric is an analyst at a wealth management firm. One of his cients holds a $5,000 the portfolio along with the contribution of risk from each stock is given in the following table: that consists of four stocks. The in tion Atteric Inc. (AI) 0.38% 0.42% 0.900 Trust Inc(AT) 15% 1.100 0.49% Transfer fuels Co. (TF) Eric calculated the portfolio's beta as 0.880 and the portfolio's expected return as 12 Eric thinks it will be a good idea to reallocate the funds in his client's portfolio. e recommends replacing Atteric Inc.'s shares with the same amount in i additional shares of Transfer Fuels Co. The risk-free rate is 6.00%, and the market risk premium is 7.50%. According to Eric's recommendation, assuming that the market is in equilibrium, the porttolio's required return will change by 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, Eric 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? O Undervalued

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