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Here are the expected returns and risks of two portfolios a domestic and a...

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Finance

Here are the expected returns and risks of two portfolios a domestic and a foreign:

E(r domestic) = 12% domestic = 10%

E(r foreign) = 16% foreign = 12%

a. Assume a correlation of 0.5 and draw all the portfolios made up of the two assets in

an Expected Return/Risk graph.

b. Repeat the procedure in part (a) assuming a correlation of -1, 0, and +1.

c. Looking at the four graphs, what do you conclude about the importance of correlation

in risk-reduction?

d. Comment on the advantages and disadvantages of international diversification

Please solve in Excel

Please also show how you have graphed

Answer & Explanation Solved by verified expert
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