A negative correlation would mean that the local stock price would benefit from a depreciation of the local currency. The currency exposure of a foreign asset is equal to it local currency exposure plus one.

GM is considering investments in the France (Stocks A and B) and Swiss (Stocks C and D) stock markets. The world market risk premium is 5.5%. The currency risk premium on the Swiss franc is 1.25%, and the currency risk premium on the euro is 2%. In the United States, the interest rate on one-year risk-free bonds is 4.75%. In addition, you are provided with the following information:

Stock	A	B	C	D
Country	France	France	Switzerland	Switzerland
w	1	0.90	1	1.5
	1	0.80	-0.25	-1.0
CF	-0.25	0.75	1.0	-0.5

Using ICAPM, E(Ri) = R0 + iw (RPw) + (SRP) +CF (SRPCF), DiMaria calculated the expected return for each of the stock.

	A.	Expected return of Stock A is 11.00%, which is 0.94% higher than stock C
	B.	Expected return of Stock B is 12.24%, which is 1.86%% higher than stock D
	C.	Expected return of Stock C is 11.94%, which is 1.24% lower than stock B.