(a)Mary has a portfolio consisting of 10 different companies' shares. She is considering selling all AAA shares in the portfolio that worth $50,000 and acquiring $50,000 of BBB shares to replace the AAA shares. AAA shares and BBB shares have the same expected return and standard deviation. Her friend Alice comments, "It will not make a difference whether you keep all of AAA shares or replace them with $50,000 of BBB shares'.

(i)Explain the circumstance(s) under which you would agree with Alice's view.

(ii)Explain the circumstance(s) under which you would disagree with Alice's view.

(b)"A fully diversified portfolio constructed by purchasing every risky asset in a market has a beta of zero." Do you agree or disagree with the statement? Explain your reasoning.