Consider the following tables for four EM equity funds priced in US dollars. You can also invest
Question:
Consider the following tables for four EM equity funds priced in US dollars. You can also invest in the MSCI EM index and in 1-year Treasury bonds whose yield is 1.5%. The table contains the average target price 1 year from now predicted by analysts, the current price and the historical return variance, price minimum and maximum during the last year.
(i) Assume you can invest in only one fund. Which one would you prefer to hold in combination with T-bills and why, based on all information given?
(ii) Assume you can now invest in all funds and the risk-free asset. Construct 3 portfolio of 3, 4 and 5 assets each (“asset” includes the funds, the index and the bond). Justify your choice of assets in each case and explain if and why any of those portfolio is more preferable than the previous choice
Corporate Finance Core Principles and Applications
ISBN: 978-1259289903
5th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan