A Canadian Plans to Buy 100 Shares of This American

question 73

Multiple Choice

$\begin{array}{|l|r|r|rr} \hline& \text { Expected Return } & \begin{array}{r}\text { Standard Deviation of } \\\text { Return }\end{array} &{\text { Correlation }} \\& & & \text { Coefficients } \\& & & \text { X }& \text {Y} \\\hline \text { Canadian Stock X } & 6 \% & 9 \% & 1.00 & \\\hline \text { American Stock Y } & 4 \% & 8 \% & 0.80 & 1.00\\ \hline\end{array}$

A Canadian plans to buy 100 shares of this American stock for US $20 per share. The current spot rate is C$1.2977 = US $1. Suppose that this investor can sell the stock for US $30 a share a year later. The spot rate at the time of the sale is C$1.3029 = US $1.
-What is the standard deviation of a portfolio if each stock has a 50% weight?

• A) 7.50%
• B) 8.00%
• C) 7.00%
• D) 8.50%
• E) 6.00%

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