Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $20,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £10,000 at a forward exchange rate of $1.95/£. Required: a. Calculate the dollar-denominated returns for each scenario. (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $20,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £10,000 at a forward exchange rate of $1.95/£. Required: a. Calculate the dollar-denominated returns for each scenario. (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
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 a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $20,000 to invest, and the current exchange rate is $2/£.
Suppose now the investor also sells forward £10,000 at a forward exchange rate of $1.95/£.
Required:
a. Calculate the dollar-denominated returns for each scenario. (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
Transcribed Image Text:Price per
Share (£)
25
£
4²
33
88
38
43
Exchange Rate
Rate of Return (%) at Given Exchange Rate
$1.80/£
$2.00/€
$2.20/£
%
%
%
%
%
%
%
%
%
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