Question

Suppose a US investor wishes to invest in a British firm currently selling for £20 per share. The investor has $13,600 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward $6,800 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 (C) Exchange Rate: Rate of Return (%) at Given Exchange Rate $1.00 $2.000 $2.2017 % %

Answer 1

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' vo a dx 2 ENG - 08:08 19-04-2020 ... X HF493 X ✓ fx HD HE HE HG HH HI HK HL HMA 40 493 494 495 496 497 498 499 PRICE PER SHARE = 20 X 2 = INVESTMENT IN SHARES = NO OF SHARES PURCHASED VALUE OF FORWARD CONTRACT = 13600 340 12920 [6800 X 1.90] 500 PRICE PER SHARE 501 2.20 502 503 504 505 ---> [ 16 X 2.20 X 340 SHARES) DOLLAR VALUE OF STOCK AT GIVEN EXCHANGE RATES 1.80 $ 2.00 $ 9792.00 10880.00 12852.00 14280.00 15912.00 17680.00 16.00 21.00 26.00 f £ 11968.00 15708.00 19448.00 506 507 508 509 PROFIT ON FORWARD CONTRACT [26 X 1.80 X 340 SHARES] 680.00 [12920 - 6800 X 1.80] (680.00) [12920 -6800 X 2.00] (2,040.00) [12920 - 6800 X 2.20] 510 511 THE ABOVE PROFIT ON FORWARD CONTRACT SHOULD BE ADDED TO ABOVE 9 EVENTS 512 513 514 515 ... CoNvexity DGM beta port future INDEX INTL CAP BUD SANDRINE LEASING PORTFOLO Q DIR right clean YIELD bond portfolio WACC EXCWACC F... Đ

' vo a dx 2 ENG 08:09 FM 19-04-2020 ... X HF531 X ✓ fx HD HE HG НІ HJ HK HL HM - 511 512 513 HE HH THE ABOVE PROFIT ON FORWARD CONTRACT SHOULD BE ADDED TO ABOVE 9 EVENTS PRICE PER SHARE TOTAL DOLLAR PROCEEDS 1.80 $ 2.00 $ 16.00 10472.00 10200.00 21.00 13532.00 13600.00 26.00 16592.00 17000.00 [15912 + 680] [17680 -680] 2.20 9928.00 (11968-2040] 514 515 13668.00 516 17408.00 [19448-2040] 517 518 519 O ANSWER RETURN ON INVESTMENT OF 13600 DOLLARS 521 522 DOLLAR VALUE OF STOCK AT GIVEN EXCHANGE RATES PRICE PER SHARE 523 $ $ $ £ --> [(17408-13600)/13600] 16.00 21.00 26.00 1.80 -23.00% -0.50% 22.00% [16592-13600)/13600] 2.00 -25.00% 0.00% 25.00% 4141 2.20 -27.00% 0.50% 28.00% 524 525 526 527 528 529 530 531 532 522 ... CoNvexity DGM beta port future INDEX INTL CAP BUD SANDRINE LEASING PORTFOLO Q DIR right clean YIELD bond portfolio WACC EXCWACC F...