The Stock Market of Country a Has an Expected Return

question 17

Essay

The stock market of country A has an expected return of 8 percent,and standard deviation of expected return of 5 percent.The stock market of country B has an expected return of 16 percent and standard deviation of expected return of 10 percent.
Assume that the correlation of expected return between A and B is negative 1.
Is it reasonable to conclude that your portfolio is on the efficient frontier? If not,then prove your point by finding just one portfolio weighting between A and B that offers more return with less risk.If you think it is on the efficient frontier,why do you think this?

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Definitions:

Current Liabilities

Debts or obligations that a company needs to pay within one fiscal year or within its normal operating cycle.

Statement of Cash Flows

A financial document that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Financial Statement

A formal document outlining the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Cash Inflows

The movement of money into a business or account, often from sales, investments, financing, or other sources.