Suppose you are a euro-based Italian investor, and you are investing €11, 600 to buy shares of a British company at £50 per share. The exchange rate is €1.45 per pound. The stock pays a £1 dividend one year later, and you sell your shares for £53. The exchange rate has changed to €1.50 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 €1.36 per pound, what is your euro rate of return on this investment?

Suppose you are a euro-based Italian investor, and you are investing €11, 600 to buy shares of a British company at £50 per share. The exchange rate is €1.45 per pound. The stock pays a £1 dividend one year later, and you sell your shares for £53. The exchange rate has changed to €1.50 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 €1.36 per pound, what is your euro rate of return on this investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 2P

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