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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Abigail Grace has a $900,000 fully diversified portfolio. She subsequently inherits ABC Company common stock worth $100,000. Her financial adviser provided her with the forecasted information below:
Â
| Â |
Monthly  Expected Returns |
Expected Standard Deviation of Monthly Returns |
|
Original portfolio |
0.67% |
2.37% |
|
ABC Company |
1.25 |
2.95 |
Â
The expected correlation coefficient of ABC stock returns and the original portfolio is .40. The inheritance changes her overall portfolio and she is deciding whether to keep the ABC stock.
Beta Determine whether the beta of Grace’s new portfolio, which includes the government securities, will be higher or lower than the beta of her original portfolio. Justify your response with one reason. No calculations are necessar
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