Suppose you purchased a common stock in the United States for USD22.50 and sold it for USD28.10. If the USD depreciated (or the Australian dollar appreciated) during that time from AUD 1 = USD 0.91 to AUD 1 = USD 0.96, what is the Australian dollar (percentage) return on the investment over the holding period? Express your answer to the nearest basis point. For this problem, we will consider Australia to be the home country.

Suppose you purchased a common stock in the United States for USD22.50 and sold it for USD28.10. If the USD depreciated (or the Australian dollar appreciated) during that time from AUD 1 = USD 0.91 to AUD 1 = USD 0.96, what is the Australian dollar (percentage) return on the investment over the holding period? Express your answer to the nearest basis point. For this problem, we will consider Australia to be the home country.

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

Problem 1PS

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Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1,001,000, and the exchange rate will be $1.4/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $501,120, and the exchange rate will be $1.6/£. You assess that the American economy will experience a boom with a 60 percent probability and a recession with a 40 percent probability. a. Estimate your exposure to the exchange risk. (Round final answer to nearest dollar.) Exposure b. Compute the variance of the pound value of your American equity position that is attributable to the exchange rate uncertainty. (Round final answer to nearest dollar.) Variance
Consider this case: Sebrele Enterprises Inc. is a U.S. firm evaluating a project in Australia. You have the following information about the project: The project requires an investment of AU$915,000 today and is expected to generate cash flows of AU$900,000 at the end of each of the next two years. The current exchange rate of the U.S. dollar against the Australian dollar is $0.7823 per Australian dollar (AUS). The one-year forward exchange rate is $0.8102 / AU$, and the two-year forward exchange rate is $0.8412 / AU$. The firm's weighted average cost of capital (WACC) is 9.5%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? $610,602 $726,908 $581,526 $639,679
Suppose then that we have three London seats, New York and Madrid In the first, the buyer type is 109,590 Yen per Dollar, in London the selling rate is 180,000 Yen per Pound Sterling while in New York is 1,677 dollars per British Pound  Suppose we have 100,000,000 yen  Carry out the arbitrage indicate the gain in terms absolute and percentage terms
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $10,000 to invest, and the current exchange rate is $2/£. a. How many shares can the investor purchase? Number of shares = b. Fill in the table below for rates of return after one year in each of the nine scenarios (three possible prices per share in pounds times three possible exchange rates). (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Price per Share (£) Pound-Denominated Return (%) Dollar-Denominated Return (%)for Year-End Exchange Rate $1.80/£ $2/£ $2.20/£ £35 % % % % % % £40 % % % % % % £45 % % % % % %
Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1,001,280, and the exchange rate will be $1.4/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $501,440, and the exchange rate will be $1.6/£. You assess that the American economy will experience a boom with a 40 percent probability and a recession with a 60 percent probability. a. Estimate your exposure to the exchange risk. (Do not round intermediate calculations.) Exposure b. Compute the variance of the pound value of your American equity position that is attributable to the exchange rate uncertainty. (Do not round intermediate calculations.) Variance
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Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1001, and the exchange rate will be $1.28/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $792, and the exchange rate will be $1.45/£. You assess that the American economy will experience a boom with a 70 percent probability and a recession with the remaining probability.Estimate the Covariance between P and S
Smart Banking Corp. can borrow $5 million at 6 percent annualized. It can use theproceeds to invest in Canadian dollars at 9 percent annualized over a 6-day period. TheCanadian dollar is worth $.95 and is expected to be worth $.94 in 6 days. Based on thisinformation, should Smart Banking Corp. borrow U.S. dollars and invest in Canadiandollars? What would be the gain or loss in U.S. dollars?
Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $946, and the exchange rate will be $1.34/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $768, and the exchange rate will be $1.39/£. You assess that the American economy will experience a boom with a 80 percent probability and a recession with the remaining probability. Estimate the expected value of the spot rate (in £ X.XXXX)
Suppose you are a British venture capitalist holding a major stake in an e-commerce start-up in Silicon Valley. As a British resident, you are concerned with the pound value of your U.S. equity position. Assume that if the American economy booms in the future, your equity stake will be worth $1,001,980, and the exchange rate will be $1.4/£. If the American economy experiences a recession, on the other hand, your American equity stake will be worth $502, 240, and the exchange rate will be $1.6/£. You assess that the American economy will experience a boom with a 50 percent probability and a recession with a 50 percent probability. a. Estimate your exposure to the exchange risk. (Round final answer to nearest dollar.) b. Compute the variance of the pound value of your American equity position that is attributable to the exchange rate uncertainty. (Round final answer to nearest dollar.)

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