Question
Assume the US risk-free rate is 2%, and the US equity market index rate of return is 18% with standard deviation of 25%. The Austrian
Assume the US risk-free rate is 2%, and the US equity market index rate of return is 18% with standard deviation of 25%. The Austrian equity market index rate of return is 20% with standard deviation of 32%, measured in US dollar. The US and Austrian markets correlation is 0.64.
Should a US investor diversify into Austria?
What correlation between the two markets will make a US investor indifferent between diversifying or not diversifying into Austria?
Step by Step Solution
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Step: 1
To determine whether a US investor should diversify into Austria we need to calculate the expected return and risk of a portfolio that includes both U...
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
