Required: Suppose a U.S. investor wishes to invest in a British firm currently selling for £33 per share. The investor has $66,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £31, £36, and £41 after 1 year. Also, consider three possible exchange rates at $1.60/£, $2/£, and $2.40/£ after 1 year. Calculate the standard deviation of both the pound- and dollar- denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange rates) is equally likely. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places.) Answer is complete but not entirely correct. Standard deviation of pound-denominated return Standard deviation of dollar-denominated return 12.37 % 19.68 %
Required: Suppose a U.S. investor wishes to invest in a British firm currently selling for £33 per share. The investor has $66,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £31, £36, and £41 after 1 year. Also, consider three possible exchange rates at $1.60/£, $2/£, and $2.40/£ after 1 year. Calculate the standard deviation of both the pound- and dollar- denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange rates) is equally likely. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places.) Answer is complete but not entirely correct. Standard deviation of pound-denominated return Standard deviation of dollar-denominated return 12.37 % 19.68 %
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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Transcribed Image Text:Problem 19-4 (Algo)
Required:
Suppose a U.S. investor wishes to invest in a British firm currently selling for £33 per share. The investor has $66,000 to invest, and
the current exchange rate is $2/£. Consider three possible prices per share at £31, £36, and £41 after 1 year. Also, consider three
possible exchange rates at $1.60/£, $2/£, and $2.40/£ after 1 year. Calculate the standard deviation of both the pound- and dollar-
denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange
rates) is equally likely. (Do not round intermediate calculations. Round your percentage answers to 2 decimal places.)
X Answer is complete but not entirely correct.
Standard deviation of pound-denominated return
Standard deviation of dollar-denominated return
12.37
19.68
%
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