1. Based on the table below (Decomposition of the Variance of International Security Returns in USD), please tell which international security is the safest investment when converted to USD? Which international security has the highest risk in the exchange rate? Which security has the lowest risk when measured in local currency? Note Ri denotes the return in local currency, Ri$ denotes the return in USD; ei denotes the change of exchange risk

Components of Var(R.)" VAR(e) 2Cover, e) VAR(R3) VAR(R) A Var Bonds Australia Canada Germany Japan Switzerland 13.82 8.77 11.89 13.60 12.38 9.94 4.54 4.61 (33.33%) 3.71 (42.32%) 2.36 (19.84%) 2.52 (18.51%) 2.07 (16.75%) 3.95 (39.73%) 4.54 (100.00%) 9.99 (72.27%) 4.64 (52.91%) 8.89 (74.76%) 10.61 (77.98%) 10.37 (83.79%) 7.50 (75.44%) 0.00 (n.a.) -0.95 (-6.85%) 0.39 (4.45%) 0.47 (3.93%) 0.31 (2.29%) -0.25 -2.03%) -1.71 (-17.18%) 0.00 (n.a.) 0.17 (1.25%) 0.03 (0.32%) 0.17 (1.47%) 0.17 (1.22%) 0.18 (1.48%) 0.20 (2.02%) 0.00 (n.a.) U.K. U.S. Stocks Australia Canada Germany Japan Switzerland U.K. U.S. 33.46 33.69 43.54 42.10 24.92 22.28 18.95 15.58 (46.56%) 20.91 (62.08%) 40.05 (91.98%) 33.94 (80.61%) 23.86 (95.73%) 18.10 (81.23%) 18.95 (100.00%) 9.99 (29.85%) 4.64 (13.77%) 8.89 (20.42%) 10.61 (25.20%) 10.37 (41.63%) 7.50 (33.65%) 0.00 in.al 8.11 (24.25%) 8.57 (25.43%) -5.29 (-12.15%) -3.07 (-7.29%) -9.59 (-38.50%) -3.52 (-15.79%) 0.00 (n.a.) -0.22 (-0.66%) -0.43 (-1.29%) -0.11 (-0.25%) 0.63 (1.49%) 0.28 (1.14%) 0.20 (0.91%) 0.00 in.a.)