A.) James, an avid international investor, just sold a

share of Nestle, a Swiss firm, for SF5,080. The share

was bought for SF4,600 a year ago. The exchange

rate is SF1.60 per U.S. dollar now and was SF1.78 per

dollar a year ago. James received SF120 as a cash

dividend immediately before the share was sold.

Compute the rate of return on this investment in terms

of U.S. dollars

B.), suppose James sold SF4,600, his principal

investment amount, forward at the forward exchange

rate of SF1.62 per dollar. How would this affect the

dollar rate of return on this Swiss stock investment? In

hindsight, should James have sold the Swiss franc

amount forward or not? Why or why not

SOLVE FOR PART B ONLY *