Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a canadian investor is considering a portfolio of

A Canadian investor is considering a portfolio of the Canadian market portfolio and Chinese market...

90.2K

Verified Solution

Question

Finance

  1. A Canadian investor is considering a portfolio of the Canadian market portfolio and Chinese market portfolio. The information about this investment is given as follows.
  • Investment period: one year
  • Portfolio weight: 40% in the Canadian market portfolio and 60% in the Chinese market portfolio.
  • During the investment period, the Chinese RMB appreciates by 5% against the Canadian dollar.
  • The Canadian market portfolio return (CAD) is 7% per annum with a variance of 0.0169, and the Chinese market portfolio return (Chinese RMB) is 12% per annum with a variance of 0.0484.
  • The standard deviation of the rate of change in the CAD/RMB exchange rate is 9%. The estimated correlation between the Chinese RMB return and the rate of change in the exchange rate is 0.20.
  • The correlation between the Canadian and Chinese market portfolios is 0.40.

  1. What is the return on the Canadian investors portfolio?
  2. What is the standard deviation of the Canadian investors portfolio?
  3. What are the pros and cons of such an international investment compared with a pure Canadian domestic investment?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students