Assume there is a fixed exchange rate between the Canadian and
U.S. dollar. The expected return and standard deviation of return
on the U.S. stock market are 18% and 15%, respectively. The
expected return and standard deviation on the Canadian stock market
are 13% and 20%, respectively. The covariance of returns between
the U.S. and Canadian stock markets is 1.5%.
If you invested 50% of your money in the Canadian stock market and
50% in the U.S. stock market, the standard deviation of return of
your portfolio would be
Multiple Choice
12.53%.
17.50%.
18.75%.
15.21%.
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