Question
In: Finance
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per...
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 $1.90/£. Calculate the dollar-denominated returns for each scenario. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
Price per Share (£) Rate of Return (%) at Given Exchange Rate Exchange Rate:
$1.80 / £ $2.00 / £ $2.20
£36 / £41 / £46
Solutions
Expert Solution
Ans. Dollar denominated Return :-
| Price Per Share/ Exchange Rate | 1.80 | 2.00 | 2.20 |
| 36 | -14% | -15% | -16% |
| 41 | -2.75% | -5% | -2.25% |
| 46 | 8.50% | 10% | 11.50% |
Detailed Calculation & Explanation is attached below :-
jeff jeffy answered 1 year agoRelated Solutions
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