Task 7 Sam's current portfolio is fully diversified and worth $900,000. He then inherits Orange Company common stock from his uncle worth $100,000. His financial adviser provided him with the following information: Original Portfolio: Expected Monthly Returns: 0.67%; Standard Deviation of monthly return: 2.37%, Orange Company stock: Expected Monthly returns: 1.25%; Standard Deviation of monthly return: 2.95%. The correlation coefficient of Orange stock return with the original portfolio returns is 0.40. a. Assume that Sam keeps the Orange stock, calculate the i. Expected return of her new portfolio, which includes the Orange stock (3 marks) ii. Covariance of Orange stock returns with the original portfolio (3 marks) iii. Standard Deviation of her new portfolio, which includes the Orange stock. (3 marks) b. Assume that Sam sells the Orange stock, he will then invest the proceeds in riskfree government securities yielding 0.05% monthly. Calculate the i. Expected return of her new portfolio, which includes the government securities (3 marks) ii. Covariance of Orange stock returns with the government securities (3 marks) iii. Standard Deviation of her new portfolio, which includes the government securities