Fin 333A (FS 20) Assignment 25: (50 points) 1. (a) Describe the difference between international portfolio and foreign direct investments (b) How would you characterize the benefits of international portfolio investment? (8 points) 2. The return from investing in foreign assets is affected by the performance of the foreign assets and the fluctuation in the exchange rate of the foreign country. Using the information given below, calculate the rate of dollar retum from an investment in a 5-year Canadian Treasury bond with face value of CS100 and pays 5% coupon which you bought year ago and sold it today: Price of Canadian bond year ago CS101 Price of Canadian bond today CS103 Canadian dollar exchange rate last year $0.8200/CS Canadian dollar exchange rate today 50.8250/CS (12 points) (a) Using the following information calculate the portfolio (pt) return and risk of a portfolio consisting of two assets: det Tik de STX Com STX. (b) Recalculate the portfolio expected return and risk by changing the correlation to -0.25 and (ii) changing the weight to 0.40 for STX and 0.60 for S&P500 and comment on the differences in the results of (a) and (b). (20 points) Note: The covariance of two stocks A and B (cov (A. B) is equal to correlation coefficient (A. B*sid of Astd of B. 4. (a) What is a Eurocurrency? What are "LIBOR" and "LIBID rates? (6) What are the benefits of participating in the Eurocurrency market, for banks! for customers? (10 points)