Question
I have this homework question: Suppose a U.S. investor wishes to invest in a British firm currently selling for 90 per share. The investor
I have this homework question: "Suppose a U.S. investor wishes to invest in a British firm currently selling for £90 per share. The investor has $36,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £88, £93, and £98 after 1 year. Also, consider three possible exchange rates at $1.8/£, $2/£, and $2.2/£ after 1 year. Calculate the standard deviation of both the pound- and dollar-denominated rates of return if each of the nine outcomes (three possible prices per share in pounds times three possible exchange rates) is equally likely".
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Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
9th Edition
73530700, 978-0073530703
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