Using the annual return data provided in Exhibit 1 of the case for Lyxor ChinaH and Lyxor MSIndia, calculate their mean returns and standard…

1. Using the annual return data provided in Exhibit 1 of the case for Lyxor ChinaH and Lyxor MSIndia, calculate their mean returns and standard deviations. With these numbers, calculate the standard deviation and return for Susie’s entire portfolio. (12 marks)

2. After adding Lyxor USDJIA, what is the portfolio’s standard deviation and return? (6 marks)

3. Based on your data analysis, should Susie diversify her portfolio or remain invested in China and India only? Why? (8 marks)

4. Calculate the betas of Lyxor ChinaH, Lyxor MSIndia, and Lyxor USDJIA (To calculate the covariance with the market proxy, use the Lyxor World return data shown in Exhibit 1 as the market proxy). Assuming a risk-free rate of 2.5 per cent and a market risk premium of 5.5 per cent, what are the required returns for each of the three ETFs? (12 marks)

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