A Sweden-based fund is considering investing in 1-year savings in the US that give a return of 10%. The spot exchange rate SEK / USD is currently 10 SEK / USD but is expected to be 9 SEK / USD in a year. The investment amount the fund intends to invest in the USA is SEK 100 million. A) Calculate the expected return for the 1-year savings in SEK. B) Assume that the spot exchange rate at the future date will not be SEK 9 / USD but instead SEK 9.50 / USD . What will be the return in SEK from the 1-year savings?
A Sweden-based fund is considering investing in 1-year savings in the US that give a return of 10%. The spot exchange rate SEK / USD is currently 10 SEK / USD but is expected to be 9 SEK / USD in a year. The investment amount the fund intends to invest in the USA is SEK 100 million. A) Calculate the expected return for the 1-year savings in SEK. B) Assume that the spot exchange rate at the future date will not be SEK 9 / USD but instead SEK 9.50 / USD . What will be the return in SEK from the 1-year savings?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A Sweden-based fund is considering investing in 1-year savings in the US that give a return of 10%. The spot exchange rate SEK / USD is currently 10 SEK / USD but is expected to be 9 SEK / USD in a year. The investment amount the fund intends to invest in the USA is SEK 100 million. A) Calculate the expected return for the 1-year savings in SEK. B) Assume that the spot exchange rate at the future date will not be SEK 9 / USD but instead SEK 9.50 / USD . What will be the return in SEK from the 1-year savings?
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