Asked by Neisha Dressler on Apr 29, 2024
Verified
Assume there is a fixed exchange rate between the Yen and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 21% and 15%, respectively. The expected return and standard deviation on the Japanese stock market are 13% and 12%, respectively. The covariance of returns between the U.S. and Japanese stock market is 2.5%.
If you invested 60% of your money in the Japanese stock market and 40% in the U.S. stock market, the expected return on your portfolio would be
A) 12.0%.
B) 16.2%.
C) 17.4%.
D) 18.5%.
Fixed Exchange Rate
A country's currency value set and maintained as equal to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.
Covariance
A measure of the degree to which two variables move in relation to each other.
Japanese Stock Market
The financial market in Japan where publically traded company stocks are bought and sold, notably includes the Tokyo Stock Exchange.
- Acquire knowledge on the principles governing effective global diversification.
Verified Answer
Learning Objectives
- Acquire knowledge on the principles governing effective global diversification.
Related questions
Assume There Is a Fixed Exchange Rate Between the Swiss ...
Assume There Is a Fixed Exchange Rate Between the Canadian ...
A Firm That Uses a Diversification Strategy to Sell a ...
Economies of Scope Is a Common Reason for Firms That ...
The Process of Eliminating Systematic Risk Through the Purchase of ...