Assume There Is a Fixed Exchange Rate Between the Canadian

question 14

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%.

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Definitions:

Business Practices

The methods, strategies, and procedures employed by companies in the design, production, marketing, and sale of their products and services.

Sherman Act

A United States antitrust law passed in 1890 that outlaws monopolistic practices and promotes competition.

Trusts

Legal arrangements where one party, known as the trustor, grants another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

Market Competition

The rivalry among companies to attract customers and gain market share by offering better products, services, and terms.