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John has a $300,000 fully diversified portfolio.

Then she inherits Google common stock worth $200,000. Her financial adviser provided the following forecast information: Original Portfolio: Expected Monthly Returns=0.6%; Standard Deviation of Returns=2.00%. For Google: Expected Monthly Returns=1.0%; Standard Deviation of Returns=3.00%.

The correlation coefficient of Google stock returns with the original portfolio returns is .4. The inheritance obviously changes Barbara's overall portfolio; assuming she keeps the Google stock, calculate the:

A) Expected Return of his new portfolio (which includes the Google stock)

b) Covariance of Google stock returns with the original portfolio returns

c) Standard deviation of the new portfolio which includes the Google stock

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92799835

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