Inevestments, Finance Basics

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1) What happens to the portfolio standard deviations as the investor substitutes the foreign securities for the U.S securities? What combination of U.S and Japanese stock minimizes risk?

2) Repeat the analysis but assume that the correlation coefficient is -0.2 instead of 0.4

3) Should a Japanese investor who owns only Japanese stock acquire U.S stocks?

4) How would each of the following affect a U.S investor''s willingness to acquire foreign stocks?

a) The dollar is expected to strengthen

b) Globalization of financial markets should accelerate.

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