Question 1 (1 point) Samsung’s stock price goes up 30% but the Korean won falls 20%...

Question 1 (1 point)

Samsung’s stock price goes up 30% but the Korean won falls 20% against the Japanese yen. From the perspective of a Japanese investor, what is the yen return on an investment in Korea’s Samsung? [Hint: Assume that P_t^d = P_t^f S_t^d/f, where, P_t^d = domestic price; P_t^f = foreign price and S_t^d/f = spot price; return from asset price: (1+r^d) = (P_t^d/P_t-1^d) and return from FX spot price: (1+s^d/f) = (S_t^d/f/S_t-1^d/f)].

Question 1 options:

a)	loss of 10%

b)	profit of 10%

c)	loss of 4%

d)	profit of 4%

Question 2 (1 point)

Which of the following statements is not correct?

Question 2 options:

a)	Traditional funds or listed investment companies invest in shares only

b)	Hedge funds invest in shares, bonds and derivatives

c)	Hedge funds are similar to managed funds in that investments are pooled and professionally managed

d)	Hedge funds follow very strict investment strategies (no flexibility in investment strategies)

Expert Solution

1.
=(1+30%)*(1-20%)-1
=1.3*0.8-1
=4.0000%

Profit of 4%

2.
Hedge funds follow very strict investment strategies (no flexibility in investment strategies)

jeff jeffy answered 2 years ago

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