A portfolio manager is considering the benefits of increasing her diversification by investing overseas. She can purchase shares in individual country funds with the expected return (ER), standard deviation (STD) and correlations (CORR) characteristic provided above.

1. What are the expected returns and standard deviations of returns of US&UK portfolios with different mixes such as 100% invested in US, 0% in UK; 90% invested in US, 10% in UK; 80% invested in US, 20% in UK;; 10% invested in US, 90% in UK; 0% invested in US, 100% in UK? Replace ?s with the right info at the above table with the help of Excel formulas.

2. What are the expected returns and standard deviations of returns of US & Spain portfolios with different mixes such as 100% invested in US, 0% in Spain; 90% invested in US, 10% in Spain; 80% invested in US, 20% in Spain;; 10% invested in US, 90% in Spain; 0% invested in US, 100% in Spain? Replace *s with the right info at the above table with the help of Excel formulas.

3. Plot these two sets of risk-return combinations as in the case at the back (one for US&UK and another for US & Spain portfolio).

4. Which combination leads to a better risk and return (the most efficient) choice from a US investor perspective [answer by calculating the changes (CHG) in ER (return improvement), STD (risk reduction) and CV (coefficient of variation return per unit of risk) and by replacing @s]. From UK investor perspective (replace #s)? From Spanish investor perspective (replace !s). Explain your answers.

5. What is the beta of the British market from a U.S. perspective? What is the beta of the Spanish market from a U.S. perspective?

6. Assume that the British pound is expected to appreciate by %5 against dollar by the end of the year. What would the expected percentage dollar return be if the US investor invested in the most efficient US & UK portfolio?

7. Assume that euro is expected to depreciate by %3 against dollar by the end of the year. What would the expected percentage dollar return be if the US investor invested in the most efficient US & Spanish portfolio?

If You Copy And Paste Another Answer I will Downvote

US UK SPAIN ER 15% 1296 596 STD 109 990 8 0.33 0.06 CORR . Weights W: 1 2 70% 100% 90% 90% 10% 204 50% 50% 40% 40% 50% 50% 30% 20% 10% 0% 70% 80% 90% 100% W2 09 309 US&UK ER 2 2 > > . 2 2 2 2 STD ? 2 2 2 2 2 2 USB SPA ER STO DIVERSIFICATION BENEFITS FOR USINVESTOR WITH UK & SPA CV=RETURN PER RETURN RISK RISK ERU Eper CHG STDus STDoor CH CHE Creer CHG 1596 10% 1.50 e 159 10% 1.50 UK SPA DIVERSIFICATION BENEFITS FORUKINVESTOR WITH US CV=RETURN PER RETURN RISK ERUL Epor CHG STOU STDoor CHG Cype CHG 1296 = = 133 = = RISK DIVERSIFICATION BENEFITS FOR SPANISHINVESTOR WITH US RETURN RISK RETURN PER RISK ARA ERRY CHG STOD STDoor CHG Cyspa Ciper CHG ! 596 125