The Stock Market of Country a Has an Expected Return

question 28

Essay

The stock market of country A has an expected return of 5 percent,and a standard deviation of expected return of 8 percent.The stock market of country B has an expected return of 15 percent and a standard deviation of expected return of 10 percent.
Assume that the correlation of expected return between security A and B is 0.2.Calculate the standard deviation of expected return of a portfolio that has half of its money invested in A and half in B.

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a profit or loss.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and shareholder's equity at a specific point in time.

Investing Activities

Investing activities involve the purchase and sale of long-term assets and other investments, not considered as cash equivalents by a company.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, excluding inventories.