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 (C) £ E £ 39 44 49 Exchange Rate Rate of Return (%) at Given Exchange Rate $1.80/ $2.00/€ $2.20/ (2.50) % 10.00 % 22.50% % % % % %
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 (C) £ E £ 39 44 49 Exchange Rate Rate of Return (%) at Given Exchange Rate $1.80/ $2.00/€ $2.20/ (2.50) % 10.00 % 22.50% % % % % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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