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 one year in each of the nine scenarios

(three pos sible pric es pe r s hare in pounds time s thre e pos sible e xchange r ates).

Price per Share (£)

Pound-Denominated Return (%)

Dollar-Denominated Return for Year-End Exchange Rate

$1.80/£ $2/£ $2.20/£

£35

£40

£45

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

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