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Assume that you have invested $100,000 in the stocks of a European company. When purchased, the stocks share price and the exchange rate were 50
Assume that you have invested $100,000 in the stocks of a European company. When purchased, the stocks share price and the exchange rate were 50 and 0.50/$1.00 respectively. When the stocks were sold, one year after the purchase date, the stocks share price and the exchange rate were 60 and 0.64/$1.00. If you had hedged the foreign exchange risk of the equities by selling 55,000 forward at the forward exchange rate of 0.55/$1.00, what would be the annual percentage rate of return of your entire investment in terms of US dollars?
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