Question
One year ago, an American investor bought 1000 shares of London Bridges at a price of 34 (or 34 UK pounds) per share when the
One year ago, an American investor bought 1000 shares of London Bridges at a price of 34 (or 34 UK pounds) per share when the exchange rate was $1.3/1 (or $1.30 dollars = 1 pound). The investor also invested 3,000,000 Japanese Yen in a money market fund in Japan last year when the exchange rate was 110 Yen = $ 1 US. (a) Using current exchange rates, what is todays value of the investors portfolio in U.S. dollars if the UK investment decreased 10% (in local currency) and the Japan investment increased 2% (in local currency)? (b) What is the overall rate of return on the portfolio over the last year?
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