9. You have collected some risk and return estimates for various market indexes. These indexes are...

 

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9. You have collected some risk and return estimates for various market indexes. These indexes are the World stock market index of developed markets, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) index, and the International Finance Corporation (IFC) Composite index of emerging markets. Here are some risk and return estimates for the future: Market World EAFE Return 10% 12% 15% World EAFE Composite Composite All return and risk measures are calculated in U.S. dollars and are expressed in % per year. The correlation matrix is given below: Risk 16% 17% 25% World 1.0 0.5 0.2 EAFE 0.5 1.0 0.1 Composite 0.2 0.1 1.0 a. Calculate the return and risk of a portfolio invested in the following proportions: Portfolio World EAFE Composite A 50% 50% 0% B 45% 45% 10% C 40% 40% 20% 9. You have collected some risk and return estimates for various market indexes. These indexes are the World stock market index of developed markets, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) index, and the International Finance Corporation (IFC) Composite index of emerging markets. Here are some risk and return estimates for the future: Market World EAFE Return 10% 12% 15% World EAFE Composite Composite All return and risk measures are calculated in U.S. dollars and are expressed in % per year. The correlation matrix is given below: Risk 16% 17% 25% World 1.0 0.5 0.2 EAFE 0.5 1.0 0.1 Composite 0.2 0.1 1.0 a. Calculate the return and risk of a portfolio invested in the following proportions: Portfolio World EAFE Composite A 50% 50% 0% B 45% 45% 10% C 40% 40% 20%

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