QUESTION 8 10 points Save Answer The realized dollar returns for a U.S. resident

Question

QUESTION 8 10 points Save Answer The realized dollar returns for a U.S. resident investing in a foreign market will depend on the return in the foreign market as well as on the exchange rate fluctuations between the dollar and the foreign currency. Calculate the variance of the monthly rate of return in dollar terms, if the variance of the foreign market's return (in terms of its own currency) is 1.14, the variance between the U.S. dollar and the foreign currency is 17.64, the covariance is 2.34, and the contribution of the cross-product term is 0.04. O 21.16 23.50 O 26.89 ? 28.65

Explanation / Answer

Solution:

option b) 23.50

Explanation:
Var(Ri$) = 1.14 + 17.64 + (2*2.34) + 0.04 = 23.50

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