Answer:
The required returns for the two portfolios are:
=0.0533
= 0.05049902
Explanation:
Standard Deviation of (Lyxor World) = 9.4262
Covariance (Lyxor ChinaH, Lyxor World) = 85.333
Covariance (Lyxor MSIndia, Lyxor World) = 81.875
Covariance (Lyxor USDJI, Lyxor World) = 56.09
β (Lyxor ChinaH) = [tex]\frac{85.33}{9.4262^{2}}[/tex] = 0.9604
β (Lyxor MSIndia) = [tex]\frac{81.875}{9.4262^{2}}[/tex] = 0.9215
β (Lyxor USDDJI) = [tex]\frac{56.09}{9.4262^{2} }[/tex] = 0.6313
β (Lyxor ChinaH, Lyxor MSIndia) = (0.6)(.9604) + (0.4)(0.9215) = 0.9448
β (Lyxor ChinaH, Lyxor MSIndia, Lyxor USDJIA) = (0.4)(0.9604) + (0.3)0.9215) + (0.3)(0.6313) = 0.85
Required Return (Lyxor ChinaH, Lyxor MSIndia) = 0.025 + 0.9448(0.055 – 0.025) = 0.0533
Required Return (Lyxor ChinaH, Lyxor MSIndia, Lyxor USDJIA) = 0.025 + 0.85 (0.055-0.025) = 0.05049902
