3. 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?

b. Fill in the table below for rates of return after 1 year in each of the nine scenarios (three possible prices per share in pounds times three possible exchange rates).

Dollar-Denominated Return for Year-End Exchange Rate Price per Share (£)

Pound-Denominated Return (%) $1.80/£ $2/£ $2.20/£

£35

£40

£45

c. When is the dollar-denominated return equal to the pound-denominated return?