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A US investor had purchased a condominium in Israel a year ago for ILS 400,000 when the spot rate for the Shekel was $0.32/ILS. She
A US investor had purchased a condominium in Israel a year ago for ILS 400,000 when the spot rate for the Shekel was $0.32/ILS. She just sold the condo for ILS 375,000. The exchange rate today is $0.31/ILS.
- What rate of return did the investor earn?
- What portion of the rate of return is due to exchange rate changes?
- What should she have sold the condo for to generate a return of 10% given the current exchange rate?
Explain the relationship below. Var(Ri$) = Var(Ri) + Var(ei) + 2Cov(Ri,ei) + Var
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