Assume There Is a Fixed Exchange Rate Between the Swiss

Assume there is a fixed exchange rate between the Swiss Franc and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 14% and 11%, respectively. The expected return and standard deviation on the Swiss Stock Exchange (SIX) are 9% and 14%, respectively. The covariance of returns between the U.S. and the SIX is 1.75%.
If you invested 350% of your money in the Swiss (SIX) stock market and 65% in the U.S. stock market, the expected return on your portfolio would be

A) 12.25%.
B) 12.5%.
C) 13.0%.
D) 13.5%.

Correct Answer:

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