Question 2 (15 marks) Victoria Tan has a $900,000,000 portfolio. She subsequently inherits Shanghai Club Company stock worth $100,000,000. Her financial advisor provides her with the following estimates: Risk and Retum Characteristics Expected Monthly Standard Deviation of Returns Monthly Returns 0.50% 1.20% 1.20% 2.00% Original portfolio Shanghai Club ii. The correlation coefficient of Shanghai Club stock returns with the original portfolio returns is 0.50. a. The inheritance changes Victoria's overall portfolio and she is deciding whether to keep the Shanghai Club stock. Assuming Victoria keeps the Shanghai Club stock, calculate the i. Expected return of her new portfolio which includes the Shanghai Club stock. (2 marks) 0.1 x 12% + 0,9x0.5%-057% Standard deviation of her new portfolio which includes the Shanghai Club stock. (3 marks) b. If Victoria sells the Shanghai Club stock, she will invest the proceeds in risk-free government securities yielding 0.10% monthly. Calculate the i. Expected return of her new portfolio which includes the government securities. (2 marks) ii. Standard deviation of her new portfolio which includes the government securities. (2 marks) c. Calculate the Sharpe ratios of two new portfolios in part (a) and part (b). Based on the Sharpe ratio, which new portfolio should Victoria form? (6 marks)