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Old MathJax webview 2. An Australian investor invests C$3mi in stock X and C$2mi in stock Y. State of Economy Probability Return Return (x) 30%
Old MathJax webview
2. An Australian investor invests C$3mi in stock X and C$2mi in stock Y. State of Economy Probability Return Return (x) 30% (V) -5% Change in Exchange Rate (%) 17% Boom 0.5 0.3 15% 10% 10% Normal Recession 0.2 -10% 25% -5% a) Calculate the return and risk for this portfolio in foreign term. Also calculate the correlation between the 2 stock returns. b) Calculate the return and risk for this portfolio in domestic term. 3. An English investor invests EURO25mi in stock M and EURO35mi in stock N. The current spot rate is 0.7/EURO State of Economy Probability Return Return Exchange Rate (/EURO) (M) (N) -5% Boom 0.4 10% 0.7896 Normal 0.2 12% 18% 25% 0.7535 0.6985 Recession 0.4 2% a) Calculate the return and risk for this portfolio in foreign term. Also calculate the correlation between the 2 stock returns. b) Calculate the return and risk for this portfolio in domestic term
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