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You are contemplating an investment in China. Your stock broker informs you that you could earn as much as 25% by investing in an oil
You are contemplating an investment in China. Your stock broker informs you that you could earn as much as 25% by investing in an oil company stock for a year. The standard deviation of the stock return is forecasted to be 14%. The yuan is expected to depreciate 12% vis-a-vis the dollar and the standard deviation of the percentage change in exchange rate is 8%. The correlation between exchange rate change and the stock's return is -0.30.
If you invest in China, what would be your expected return and its standard deviation?
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