Components of Var(R) Var(e) Var(R) Var(R) 2Cov(Re) AVar 13.81 7.60 10.97 12.73 12.55 9.91 4.55 4.57 (33.09%) 3.47 (45.66%) 2.86 (26.07)% 1.98 (15.55%) 2.07 (16.49%) 4.17 (42.08%) 4.55 (100%) 11.20 (81.10%) 4.90 (64.47%) 9.19 (83.77%) 9.93 (78.00%) 10.82 (86.22%) 7.57 (76.39%) 0.00 (n.a.) -2.08 (-15.06%) -0.79 (-10.39%) -1.22 (-11.12%) 0.69 (5.42%) -0.57(-4.54%) -2.02 (-20.38%) 0.00 (n.a.) 0.12 (0.87%) 0.02 (0.26%) 0.14(1.28%) 0.13(1.03%) 0.23 (1.83%) 0.19 (1.92%) 0.00 (n.a.) Bonds Australia Canada Germany Japan Switzerland U.K. U.S. Stocks Australia Canada Germany Japan Switzerland U.K. U.S. 37.75 31.35 44.44 39.85 24.54 25.77 20.27 16.36 (43.34%) 18.25 (58.21%) 37.58 (84.56%) 34.45 (86.46%) 20.75 (84.58%) 18.88 (73.28%) 20.27 (100%) 11.20 (29.67%) 4.90 (15.61%) 9.19 (20.67%) 9.93 (24.91%) 10.82 (44.08%) 7.57 (29.36%) 0.00 (n.a.) 10.39 (27.52%) 8.51 (27.14%) -2.54 (-5.72%) -5.07(-12.72%) -7.27(-29.65%) -0.86 (-3.34%) 0.00 (n.a.) -0.20 (-0.53%) -0.31 (-0.96%) 0.21 (0.49%) 0.54 (1.35%) 0.24 (0.99%) 0.18 (0.70%) 0.00 (n.a.) The table below decomposes the total risk of a foreign investment (for a US citizen) into different components. Explain these components. [2 MARKS] Using this information, discuss the importance of exchange rate risk for two different asset classes, stocks and bonds. In your answer, use Australia as an example to illustrate your point. (8 MARKS)