The companys CEO asks you to prepare a report to provide your views if he wishes to cross-list Junebank equity shares on more than one national exchange and to source IPO from both domestic and foreign investors. The CEO is asking you to analyze investment in a US mutual fund. This targeted US mutual fund has invested a total of $14 million in the UK shares. The spot exchange rate is $1.65. The forward rate for delivery in six months is at $1.645. Six months later, the UK shares can be sold for 8.5 million and the spot exchange rate is at $1.69.

From the investment in the US mutual fund, provide the possible profit or loss in terms of USD based on the spot exchange rate of $1.65. Then described is the US mutual fund had it originally hedged its initial investment in the UK shares. Compute the USD based annualized rate of return. Explain the result if its USD denominated profit and rate of return, had it not hedged.