Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $12,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £6,000 at a forward exchange rate of $2.10/£. 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.) Price per Share (E) £ £ £ 39 44 49 Exchange Rate Rate of Return (%) at Given Exchange Rate $1.80/E $2.00/E $2.20/£ (2.50) % 10.00 % 22.50 % % % % % % %

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
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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 $12,000 to invest, and the
current exchange rate is $2/£.
Suppose now the investor also sells forward £6,000 at a forward exchange rate of $2.10/£.
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.)
Price per
Share (E)
£
3
£
39
44
49
Exchange Rate
Rate of Return (%) at Given Exchange Rate
$1.80/E
$2.00/E
$2.20/£
(2.50) %
10.00 %
22.50%
%
%
%
%
%
Transcribed Image Text:Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $12,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £6,000 at a forward exchange rate of $2.10/£. 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.) Price per Share (E) £ 3 £ 39 44 49 Exchange Rate Rate of Return (%) at Given Exchange Rate $1.80/E $2.00/E $2.20/£ (2.50) % 10.00 % 22.50% % % % % %
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