Assume There Is a Fixed Exchange Rate Between the Canadian

question 16

Multiple Choice

Assume there is a fixed exchange rate between the Canadian and U. S. dollar. The expected return and standard deviation of return on the U. S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U. S. and Canadian stock markets is 1.5%.
-If you invested 50% of your money in the Canadian stock market and 50% in the U.S.stock market,the expected return on your portfolio would be __________.

• A)12.0%
• B)12.5%
• C)13.0%
• D)15.5%
• E)none of the above

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Definitions:

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