Mr. James K. Silber, an avid international investor, just sold a share of Néstle, a Swiss firm, for SF6,050. The share was bough for SF4,760 a year ago. The exchange rate is SF2.40 per U.S. dollar now and was SF2.10 per dollar a year ago. Mr. Silber received SF152 as a cash dividend immediately before the share was sold. Suppose that Mr. Silber sold SF4,760, his princip investment amount, forward at the forward exchange rate of SF2.42 per dollar. How would this affect the dollar rate of retur on this Swiss stock investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return %

Mr. James K. Silber, an avid international investor, just sold a share of Néstle, a Swiss firm, for SF6,050. The share was bough for SF4,760 a year ago. The exchange rate is SF2.40 per U.S. dollar now and was SF2.10 per dollar a year ago. Mr. Silber received SF152 as a cash dividend immediately before the share was sold. Suppose that Mr. Silber sold SF4,760, his princip investment amount, forward at the forward exchange rate of SF2.42 per dollar. How would this affect the dollar rate of retur on this Swiss stock investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Rate of return %

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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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

Mr. James K. Silber, an avid international investor, just sold a share of Néstle, a Swiss firm, for SF6,050. The share was bought
for SF4,760 a year ago. The exchange rate is SF2.40 per U.S. dollar now and was SF2.10 per dollar a year ago. Mr. Silber
received SF152 as a cash dividend immediately before the share was sold. Suppose that Mr. Silber sold SF4,760, his principal
investment amount, forward at the forward exchange rate of SF2.42 per dollar. How would this affect the dollar rate of return
on this Swiss stock investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2
decimal places.)
Rate of return
%

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