Question

Use the following charts to answer the questions below:

			Stock Indexes
	Switzerland	Mexico	India	Japan	France
February, 2015	9,014.53	44,190/17	29,220.12	18,797.94	4,951.48
February, 2019	9,388.94	42,823.81	35,867.44	21,385.16	5,240.53
February, 2020	9,831.03	41,324.31	38,297.29	21,142.96	5,309.90

			Exchange-Rates
	Switzerland (SF/USD)	Mexico (Pesos/USD)	India (Rupees/USD)	Japan (Yen/USD)	France ($/Euro)
February, 2015	0.9361	14.9170	61.9905	118.7600	1.1350
February, 2019	1.0014	19.1953	71.1739	110.4400	1.1349
February. 2020	0.9762	18.8423	71.5295	110.0295	1.0911

1. For each country, report the stock index values and ex-rates for February, 2019 and February, 2020.

2. Calculate the annual percentage return for each stock market from February, 2019 - February, 2020, measured in local currency. Use the standard percentage return formula: [(P2 - P1)/P1] x 100.

3. For each currency, calculate the annual percentage change from February, 2019 to February, 2020 using the exchange rate exactly as quoted, and for each currency separately, clearly explain in a full sentence or two whether each of the foreign currencies appreciated or depreciated versus the dollar.

4. Calculate the effective, annual US dollar return for a U.S. investor who had invested money in the stock markets of each of the five countries last year (February 2019 - February 2020), using the formula: Effective dollar return = % foreign stock market return +/- %CHG in the foreign currency.

Answer 1

1 - Please find below the Stock Indexes values and exchanger for each country for February 2019 and February 2020.

Period	February 2019	February 2020
Particulers	Stock Indexes	USD Exchange Rate	Stock Indexes	USD Exchange Rate
Switzerland	9388.94	1.0014	9831.03	0.9762
Maxico	42823.81	19.1953	41324.31	18.8423
India	35867.44	71.1739	38297.29	71.5295
Japan	21385.16	110.4400	21142.96	110.0295
France	5240.53	1.1349	5309.90	1.0911

2. Annual % return of each stock exchange.

1. For Switzerland return is 9831.03*100/9388.94 = 104.7086 - 100 = 4.7086% ( Switzerland Stock Exchange has given positive return of 4.7086%, means if one has invested 100 SF in February 2019 his value would be 104.708 in February, 2020))

  2. For Maxico return is 41324.31*100/42823.81 = 96.4984 - 100 = -3.5016% (Maxico Stock Exhcange has given negative return of 3.5016%, this means if one has invested 100 Pesos in February 2019 his value would be 96.4984 Pesos in February, 2020)

3. For India return is 38297.29*100/35867.44 = 106.7745 - 100 = 6.7745% ( Indian Stock Exchange has given positive reutrn of 6.7745%, this means if one has invested 100 Rupees in February 2019 his value would be 106.7745 in February, 2020)

4. For Japan return is 21142.96*100/21385.16 = 98.8674 - 100 = -1.1356% (Japan's Stock Exchange has given negative return of 1.1356%, this means if one has invested 100 Yen in February 2019 his value would be 98.8674 Yen in February, 2020).

5. For France return is 5309.90*100/5240.53 = 101.3237 - 100 = 1.3237 (France's Stock exchange has given positive reutrn of 1.3237%, this means if one has invested 100 Euro in February 2019 his value would be 101.3237 Euro in February 2020)

3. Annual % change in Exchange rate.

1. USD/SF return is 0.9762*100/1.0014 = 97.4835 -100 = -2.5165%, The SF has been increased by 2.5165% in February 2020 as compare to February 2019. In February 2019 1USD = 1.0014 SF means value of USD was higher than the value of SF, but in February 2020 1USD = 0.9762SF   means value of SF is lower than USD. Thus SF has been apriciated against USD.

2. USD/Pesos 18.8423*100/19.1953 = 98.1610 - 100 = -1.8390%, The Pesos has been increased by 1.8390% in Febrary 2020 as compare to February 2019. In February 2019 1USD = 19.1953Pesos and in February 2020 1USD = 18.8423Pesos so value of USD has been reduce compare to last February 2019 and Value of Pesos has been improved.

3. USD/Rupees 71.5295*100/71.1739 = 100.4996 - 100 = 0.4996% The Rupees has been decreased by 0.4996% as in February 2019 1USD = 71.1739 and in February 2020 1USD = 71.5295 so the value of USD has been increased and Rupees has been decreased.

4. USD/Yen 110.0295*100/110.4400 = 99.6283 - 100 = -0.3717% The Yen has been increased by 0.3717% as in February 2019 1USD = 110.4400 and in February 2020 1USD = 110.0295 so the value of USD has been decreased and Yen has been increased.

5. USD/EURO 1.0911*100/1.1349 = 96.1406 - 100 = -3.8594% The EURO has been increased by 3.8594% as in February 2019 1USD = 1.1348EURO and in February 2020 1USD=1.0911EURO so the value of USD has been decreased and EURO has been increased.

4. Effective USD return = % Foreign Stock Market Return +/- %Change in Foreign Currency.

1. Effective USD return for the funds invested in Switzerland = 4.7086%-2.5265% = 2.1821%. So if US investor has invested 100USD in Seitzerland his actual gain would be 2.1821% means his value would be 102.1821 due to reduce in USD exchange value.

2. Effiective USD return for the funds invested in Maxico = -3.5016%-1.8390% = -5.3406%. So USD100 invested in Maxico in February 2019 would have valued at USD94.6594 due to decrease in stock market of Maxico and Decrease in USD exchange rate.

3. Effective USD return for the funds invested in India = 6.7745%+0.4996% = 7.2741%. So USD100 invested in India in February 2019 would have valued at USD107.2741 due to increase in stock market and icrease in USD exchange rate.

4. Effictive USD return for the funds invested in Japan = -1.1356%-0.3717% = -1.5073%. So USD 100 invested in Japan in February 2019 would have valued at USD98.4927 due to decrease in stock market and decrease in USD exchange rate.

5. Effective USD return for the funds invested in France = 1.3237%-3.8594% = -2.5357%. So USD 100 invested in France in February 2019 would have valued at USD97.4643 due to minor increase in stock market and decrease in USD exchange rate.