Question: A U.S. pension fund has a domestic portfolio with an expected return of 10 percent and a standard deviation of 12 percent. It also invests

A U.S. pension fund has a domestic with an of 10 percent and a standard deviation of 12 percent. It also invests in a foreign equity fund that has an expected dollar return of 11 percent and a dollar standard deviation of 20 percent. The correlation of the foreign and U.S. is 0.2. The current dollar interest rate is 8 percent. Would you say that the foreign equity is attractive from a risk-return viewpoint?

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