Suppose a Canadian investor wishes to invest in a British stock currently selling for 80 per share. The investor has $1,300,000 to invest, and the current exchange rate is $1.30/.

a) How many shares can the investor purchase?

b) Fill in the table below for rates of return after one year in each of the nine scenarios (three possible prices per share in pounds times three possible exchange rates).

c) When is the dollar-denominated return equal to the pound-denominated return?

Price per Share ()	Pound- Denominated Return (%)	$-Denominated Return (%) for Year-End Exchange Rate 1.1/ pound	$-Denominated Return (%) for Year-End Exchange Rate 1.3/pound	$-Denominated Return (%) for Year-End Exchange Rate 1.5/pound
70 pounds
80 pounds
90 pounds

d- If each of the nine outcomes in the question above is equally likely , find the standard deviation of both the pound and dollar-denominated rates of return.

e- Now suppose that the investor in question (d) also sells forward 1000,000 at a forward exchange rate of $1.30/. a) Recalculate the dollar-denominated returns of each scenario. b) What happens to the standard deviation of the dollar-denominated return? Compare it both to its old value and the standard deviation of the pound denominated return.