Question
Suppose a U.S. investor wishes to invest in a British firm currently selling for 120 per share. The investor has $36,000 to invest, and the
Suppose a U.S. investor wishes to invest in a British firm currently selling for 120 per share. The investor has $36,000 to invest, and the current exchange rate is $2/. Consider three possible prices per share at 105, 110 and 115 after 1 year. Also, consider three possible exchange rates at $1.6/, $2/ and $2.4/ 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. (Round your answers to 2 decimal places. Do not round intermediate calculations. Omit the "%" sign in your response.) |
Standard deviation of pound-denominated return | % |
Standard deviation of dollar-denominated return | % |
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