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A Foreign Institutional Investor (Fil) invested in Indian capital market on December 01,2000. When the Mumbai stock exchange sensex was quoting at 3800. The rupee-dollar
A Foreign Institutional Investor (Fil) invested in Indian capital market on December 01,2000. When the Mumbai stock exchange sensex was quoting at 3800. The rupee-dollar spot exchange rate at that time was Rs./$46.30/33. The Fll sold the investment on November 30, 2001. When the Mumbai stock exchange sensex was quoting at 3250, to take back the amount in dollars. The spot exchange rate quoted on November 30, 2001 was Rs./$48.02/05. Inflation rate in India was 6%, and in US was 2.5% during the same period. You are required to: i. Compute nominal rate of return to FIL ii. Compute real rate of return to FII. iii. Compute the real return to an Indian investor who invested Rs. 100,000 in the capital market for the same period. (You can assume return earned should be in line with the return from sensex.)
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