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A Canadian investor is considering a portfolio of the Canadian market portfolio and Chinese market...

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Finance

A Canadian investor is considering a portfolio of the Canadian market portfolio and Chinese market portfolio. The information about this investment is given as follows. Investment period: one year Portfolio weight: 40% in the Canadian market portfolio and 60% in the Chinese market portfolio. During the investment period, the Chinese RMB appreciates by 5% against the Canadian dollar. The Canadian market portfolio return (CAD) is 7% per annum with a variance of 0.0169, and the Chinese market portfolio return (Chinese RMB) is 12% per annum with a variance of 0.0484. The standard deviation of the rate of change in the CAD/RMB exchange rate is 9%. The estimated correlation between the Chinese RMB return and the rate of change in the exchange rate is 0.20. The correlation between the Canadian and Chinese market portfolios is 0.40.

What is the standard deviation of the Canadian investors portfolio?

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