Solution-Calculate the expected portfolio return

Calculate the expected portfolio return

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Reference no: EM133056196

Suppose you are a US investor looking for international diversification opportunities. Your investment advisor offers you an international equity index that expects annual returns of 18%, but the volatility of these returns is 48%. This international index comprises other developed countries as well as some emerging economies. The expected returns, volatility, and correlations are provided below:

	Risk-Free Rate	US Equity Index Returns (annual)	International Equity Index Returns (annual)
Expected Returns	3%	8%	18%
Std. Deviation (Volatility)	0%	18%	48%
Correlation US Equity Index	0	1	0.4
Correlation International Equity Index	0	0.4	1

a. Calculate the expected portfolio return, standard deviation, and Sharpe ratios assuming the weights for the US and International equity indexes are as follows:

	US Equity index returns (Weight)	International equity index returns (Weight)	Expected Return	Std. Deviation	Slope of CAL (Sharpe Ratio)
1	0	100%
2	10%	90%
3	20%	80%
4	30%	70%
5	40%	60%
6	50%	50%
7	60%	40%
8	70%	30%
9	80%	20%

11	90%	10%
12	100%	0%

Reference no: EM133056196

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Calculate the expected portfolio return

Reference no: EM133056196

Reference no: EM133056196

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