INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 25, Problem 6PS
Summary Introduction
To calculate:
On the basis of the selection of currency, country and stock for the manager, ascertain the contribution to total performance.
Introduction:
EAFE index is maintained by MSCI Inc. it is stock market index. It is created to calculate the performance of developed countries equity market which is outside U.S. and Canada.
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The factor used to convert from one country's currency to another country's currency is called the:
A)Interest rate.
B)Cost of capital.
C)Exchange rate.
D)Strike price.
Required:
Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All
exchange rates are expressed as units of foreign currency that can be purchased with 1 U.S. dollar. (Do not round intermediate
calculations. Round your percentage answers to 2 decimal places. Input all amounts as positive values.)
Europe
Australasia
Far East
Currency Selection
Country Selection
Stock Selection
EAFE Weight
0.10
0.20
0.70
%
%
%
Return on Equity Index
18%
14
23
Profit/Loss
relative to EAFE
relative to EAFE
relative to EAFE
E1/E0
0.70
1.05
1.30
Manager's Weight
0.20
0.40
0.40
Manager's Return
20%
15
15
Calculate the contribution to total performance from currency, country, and stock selection for the manager in the example below. All exchange rates are expressed as units of foreign currency that can be purchased with 1 U.S. dollar.
EAFE Weight
Return on Equity Index
E1E0E1E0
Manager's Weight
Manager's Return
Europe
0.60
18%
1.20
0.70
17%
Australasia
0.20
18
0.55
0.10
18
Far East
0.20
23
1.40
0.20
18
Chapter 25 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
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