You work for a Pension Fund. You are considering moving a quarter of your $400 million US equity portfolio into the Japanese stock market. The expected return and standard deviation of returns in the US market are 10% and 14% respectively. The expected return and standard deviation of the Japanese market's returns, measured in US dollars, are 12% and 17% respectively. The correlation coefficient of returns between the two markets is 0.6.

If you moved the money, what would the fund portfolio's standard deviation of returns be?

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To calculate the portfolios standard deviation of returns after moving a quarter of the US equity po... View the full answer