90.2K
Verified Solution
Link Copied!
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
