CHAPTER TWENTY-FIVE. INTERNATIONAL INVESTING. THE TOTAL INVESTABLE INTERNTATIONAL CAPITAL MARKET PORTFOLIO. GLOBAL DISTRIBUTION OF CAPITAL (by market in trillions of US$) Non-U.S. Bond & Equity Markets =$25 Total World Portfolio = 49.1 Fixed Income securities = 25.9.
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(by market in trillions of US$)
(by country in trillions of US$)
Assume an investor can buy either a 5% U.S. Treasury bond or a 7% German bond, which gives a better return?
If the German mark is expected to depreciate by 2% against the U.S.$, neither bond offers a better return
sF= the risk of the foreign portfolio
sD = the risk of the foreign stock
sC = the risk of the foreign currency
rDC= the correlation between the currency change and the asset returns