Suppose you have the following inputs: TSX/S&P Return = 20 - MSCI -World Index Return =18 Variance of the Canadian index =30 Variance of the World index = 26 Correlation coefficient p = .60 Risk free = 2 Assume that the weight on the optimal portfolio is .554 for the TSX. And that the standard deviation of the optimal portfolio is 4.76 The extra return the investor would receive by investing in the optimal portfolio but maintaining the same level of risk associated with the domestic (Canadian) market (TSX) would be
Suppose you have the following inputs: TSX/S&P Return = 20 - MSCI -World Index Return =18 Variance of the Canadian index =30 Variance of the World index = 26 Correlation coefficient p = .60 Risk free = 2 Assume that the weight on the optimal portfolio is .554 for the TSX. And that the standard deviation of the optimal portfolio is 4.76 The extra return the investor would receive by investing in the optimal portfolio but maintaining the same level of risk associated with the domestic (Canadian) market (TSX) would be
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose you have the following inputs:
• TSX/S&P Return 20
• MSCI -World Index Retun 18
• Variance of the Canadian index =30
• Variance of the World index = 26
• Correlation coefficient p = ,60
• Risk free = 2
Assume that the weight on the optimal portfolio is .554 for the TSX. And that the
standard deviation of the optimal portfolio is 4.76
The extra return the investor would receive by investing in the optimal portfolio but maintaining the same level of risk associated with the domestic (Canadian) market (TSX) would be
approximately (i.e. closest to).
O A. 1.42
O B. 22%
c. 1.21 %
O D. 1.69
Resel Selecion
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