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Standard deviation of pound-denominated return Standard deviation of dollar-denominated return % %

Standard deviation of pound-denominated return Standard deviation of dollar-denominated return % %

Essentials Of Investments
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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          PLEASE ANSWER FULLY AND CORRECTLY: DO NOT GIVE ME THE WRONG ANSWER

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 per £. Consider three possible prices per share at £35, £40, and £45 after 1 year. Also, consider three possible exchange rates at $1.80 per £, $2 per £, and $2.20 per £ 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.

Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places.

 

 

 
 
 
Standard deviation of pound-denominated return Standard deviation of dollar-denominated return % %
Transcribed Image Text:Standard deviation of pound-denominated return Standard deviation of dollar-denominated return % %
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