ppose you start with buying a stock in £ (equivalent to $100) when the e te is £1 = $1.5. One year later, the stock price changes to £75, and you s e time of the sale, the exchange rate is £1 = $1.6. What is your total pero turn? What percentage of your return is due to the exchange rate? Total return = 12.50%; Exchange rate return = 6.67%. Total return = 20%; Exchange rate return = 7.50%. Total return = 20%; Exchange rate return = 0.0%. Total return = 12.50%; Exchange rate return = 7.50%. Total roturn-00% Exchange rato return - 7 50%

ppose you start with buying a stock in £ (equivalent to $100) when the e te is £1 = $1.5. One year later, the stock price changes to £75, and you s e time of the sale, the exchange rate is £1 = $1.6. What is your total pero turn? What percentage of your return is due to the exchange rate? Total return = 12.50%; Exchange rate return = 6.67%. Total return = 20%; Exchange rate return = 7.50%. Total return = 20%; Exchange rate return = 0.0%. Total return = 12.50%; Exchange rate return = 7.50%. Total roturn-00% Exchange rato return - 7 50%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Assume that you have invested $100,000 in Japanese equities. When purchased the stock's price and the exchange rate were V100 and V100/$1.00 respectively. At selling time, one year after purchase, they were Y110 and V110/51.00. If the investor had sold V10,000,000 forward at the forward exchange rate of V105/$1.00 the dollar rate of return would be: ⒸA. 28.00% ●B.-9.09% OC 4.32% OD 27.27%
A European call that will expire in one year is currently trading for $3. Assume the risk-free rate (based on continuous compounding) is 5%, the underlying stock price is $60 and the strike price is $55. a. Is there an arbitrage opportunity? b. Describe exactly what a trader should do to take advantage of the arbitrage opportunity assuming it exists. c. Determine the present value of the profit that the trader can earn assuming you identify an arbitrage opportunity. Use at least four decimal places for those questions that require a numerical answer.
(a) Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock. One year after investment, the stock pays a £1 dividend, and sells for £55 the exchange rate has changed from €1.25 per pound to €1.30 per pound. (b) Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock using 50 percent margin. One year after investment, the stock pays a £1 dividend, and sells for £54. In the meantime, the exchange rate has changed from €1.25 per pound to €1.30 per pound. The interest on the margin loan is 1 percent per year. The margin loan was denominated in pounds.
Suppose an investor buys a share of British Petroleum at a price of £32 at the start of the year. During the year, the investor receives a dividend of £1.5. At the end of the year, the price of BP is £34. During the year, the exchange rate goes from £1 = $1.78 to £1 = $1.63. What was the investor's dollar return on BP? a) -2.35% b) -6.47% c) 1.59% d) 10.94%
Required: Suppose you are a euro-based Italian investor, and you are investing €11,200 to buy shares of a British company at £50 per share. The exchange rate is €1.40 per pound. The stock pays a £1 dividend one year later, and you sell your shares for £54. The exchange rate has changed to €1.45 per pound at the time of your sale. What is your pound rate of return on this investment and the change in pound-euro exchange rate? What is your euro rate of return? If you had agreed at the outset to sell £8,000 forward at the rate of €1.35 per pound, what is your euro rate of return on this investment? Note: Enter your answer as a percent rounded to 2 decimal places. Pound rate of return % _____ Change in pound-euro exchange rate % _______ Euro rate of return on €11200 inverstment % ___________ Euro rate of return on €8,000 forward sale % ________
Suppose that the 90-day forward rate is $1.17/€, the current spot rate is S1.20/€, and you expect the future spot rate in 90 days to be S1.21/€. If the standard deviation of the 90-day rate of appreciation of the euro relative to the dollar is 2% (in terms of the current spot rate), what range covers 95.46% of your possible profits and losses (assume a normal distribution on the future spot rate)? O a. [-S0.032, SO.112] O b. [-S0.008, S0.0OSS] O . [S0.023, S0.075] O d. [S0.016, S0.064]
In a market with an unchanged current exchange rate where the interest parity condition holds, if investors now expect the exchange rate to be 6.25% lower a year from now, the return on foreign bonds with an interest rate of 5.75%would be ____enter your response here%. (Enter your response rounded to two decimal places.)
Suppose you own a portfolio of British securities valued at $430,000. The exchange rate is currently at $1= £0.57. A currency futures contract on British pounds is set at 62,500 pounds. a. How many contracts must you purchase to protect your portfolio from exchange rate risk? b. Suppose 1 month after you purchase the contracts, the exchange rate changes to $1 = £0.59. What is your profit/loss in USD?
An investment will pay you $4,611.9 in 3 years if you pay $1,376.68 today. What is the implied rate of return? (Convert to a percent. Round to 2 decimal places.)
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $10,000 to invest, and the current exchange rate is $2/£. a. How many shares can the investor purchase? Number of shares = b. Fill in the table below for rates of return after one year in each of the nine scenarios (three possible prices per share in pounds times three possible exchange rates). (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Price per Share (£) Pound-Denominated Return (%) Dollar-Denominated Return (%)for Year-End Exchange Rate $1.80/£ $2/£ $2.20/£ £35 % % % % % % £40 % % % % % % £45 % % % % % %
If the exchange at time t is Et = €1.2/$. You invest $1 in an euro asset at t, which has an interest of 8%. When the asset expires at t+1, you get paid € (x.x round UP to one decimal place). If Et+1 = €1.02/$, then your rate of return in terms of € is % (round to the nearest integer). Question 8 options: Blank # 1 Blank # 2
Assume you invest in the European Equity Market and have a 15% return (quoted in Euros). a) If during this period the euro appreciated by 10% against the dollar, what would be your actual return, translated into United States dollars?b) What if the euro declined by 10% against the dollar, what would your actual return be, translated into dollars?c) Recompute the answer based on a 15% decline in the euro against the dollar.

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