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Assume there is a fixed exchange rate between the Canadian and U.S. dollar. The expected return...

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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