Q.2 International equilibrium of the capitaur market (25pts)

a) Using the return on investment approximation

internationally. show that the variance

the volatility of this yield is not additive

b) What is the Sharpe ratio used for? Define and explain

c) Is there a reduction in risk through diversification?

international? To explain

d) What is the hurdle rate? Define and explain

e) What is the global CAPM?

f) Explain what the efficient frontier is in an international context. How can we solve the

average-vanance problem in this context? Define and explain.