Part A

From the figure below, write your understanding about the relationship of number of stocks invested in U.S. Stocks and Risk as well we number of stocks invested in International Stocks and Risk. What do the lines of both sets of stocks convey from the perspective of risk when the number of stocks are 10, 25 and 50?

Part B

During the year Honda Motor Company shares went from 9,010 to 11,210, while paying a dividend of 60. At the same time, the exchange rate went from $1 = 145 to $1 = 120. What was the total dollar return, in percent, on Toyota stock for the year? Explain in not more than three sentences whether the return was driven more by the stock market or by the exchange rate?

Risk (%) 100 80 60 40 20 5 10 15 20 U. S. Stocks International Stocks 25 30 35 40 Number of Stocks 45 50 55