The following shows the returns and standard de viations of three stock in-dices: US, Germany and Japan: Expected return Standard deviation US 16% 21% Germany 20% 25% Japan 17% 27% The correlation matrix of the three stock indices is as follows: US Germany Japan US 100% Germany 37% 100% Japan 26% 33% 100% You construct a portfolio of the three markets with 15% weight in US, 40% weight in Germany and 45% weight in Japan. Calculate the expected return and standard deviation of the return of the portfolio.

The following shows the returns and standard de viations of three stock in-dices: US, Germany and Japan: Expected return Standard deviation US 16% 21% Germany 20% 25% Japan 17% 27% The correlation matrix of the three stock indices is as follows: US Germany Japan US 100% Germany 37% 100% Japan 26% 33% 100% You construct a portfolio of the three markets with 15% weight in US, 40% weight in Germany and 45% weight in Japan. Calculate the expected return and standard deviation of the return of the portfolio.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 12P

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