1. Risk and Return (beginner). Consider the following information on the expected return and risk of two...
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1. Risk and Return (beginner). Consider the following information on the expected return and risk of two country funds – the Taiwan country fund (asset 1) and the Ukraine country fund (asset 2):
a. Calculate the expected return and risk of portfolios invested in the following proportions. Assume a correlation of ρ = 0.35.
Using the expected return and risk calculations for all the portfolios, plot the efficient frontier.
b. Assuming now ρ = –1, ρ = 0, and ρ = +1, repeat part a.
c. What do you conclude about the role played by correlation in risk reduction?
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