An investor has a S900,000 fully diversified portfolio. He subsequently inherits ABC Company common stock worth dollar100,000. His financial advisor provided him with the following forecast information: the expected monthly returns and the standard deviation of monthly returns for the original portfolio are 0.67% and 2.37%, respectively; the corresponding estimates for the ABC Company stock are 1.25% and 2.95%, respectively. The correlation coefficient of ABC stock returns with the original portfolio returns is 0.40. a. The inheritance changes the investor's overall portfolio and he is deciding whether to keep the ABC stock. Assuming he keeps the ABC stock, calculate the Expected return of his new portfolio that includes the ABC stock. Covariance of ABC stock returns with the original portfolio returns. Standard deviation of his new portfolio that includes the ABC stock. b. If the investor sells the ABC stock, he will invest the proceeds in risk free government securities yielding 0.42% monthly. Assuming he sells the ABC stock and replaces it with the government securities, calculate the Expected return of his new portfolio, that includes the government securities Covariance of the government security returns with the original portfolio returns. Standard deviation of his new portfolio, that includes the government securities c. Determine whether the systematic risk of his new portfolio, which includes the government securities, will be higher or lower than that of his original portfolio. d. Based on conversations with his friend, the investor is considering selling the SI 00,000 of ABC stock and acquiring SI 00,000 of XYZ Company common stock instead. XYZ stock has the same expected return and standard deviation as ABC stock. His friend comments, "It doesn't matter whether you keep all of the ABC stock or replace it with dollar100,000 of XYZ stock." State whether the friend's comment is correct or incorrect. Justify your response. e. In a recent discussion with his financial advisor, the investor commented, "If I just don't lose money in my portfolio, I will be satisfied." He went on to say, "I am more afraid of losing money than I am concerned about achieving high returns." Describe one weakness of using standard deviation of returns as a risk measure for this investor