| ezto.mhe. (8096 ) : 8. 15,00 points value Suppose a U.S. investor wishes to in

Question

| ezto.mhe. (8096 ) : 8. 15,00 points value Suppose a U.S. investor wishes to invest in a British fim $110, A, wishes to invest in a British firm currently selling for £120 per share. The inves for £120 400 to invest, and the current exchange rate is $4 a. How many shares c n the investor purchase? Number of shares 230 b. Fillin the table below for rates of return after one year in each of the nine scenarios (three possible prices p share in pounds times three possible exchange rates). (Leave no cells blank -be certain to enter "o" wherever required. Negative values should be indicated by a minus sign. Do not round intermediat calculations. Round your answers to 2 decimal places.) Do ated Return (%) Pound-Denominated Return (%) Price per Share (E) £114.00 £120.00 126.00 for Year-End Exchange Rate $4.00/E $3.40/E 34.60/E eferences eBook & Resources rksheet

Explanation / Answer

Answer a Calculation of No.of shares investor can purchase No.of shares investor can purchase = Amount of Investment / Selling price per share in dollar Selling price per share in dollar = £120 * $4 per £ = $480 per share No.of shares investor can purchase = $110400 / $480 = 230 shares Answer b Calculation of rate of return after one year Price Per share Return in Pound Pound Denominated Return Dollar Denominated Return $3.40/£ $4.00/£ $4.60/£ Dollar return % Dollar return % Dollar return % £114 -£6 -5.00% -$92.40 -19.25% -$24.00 -5.00% $44.40 9.25% £120 £0 0.00% -$72.00 -15.00% $0.00 0.00% $72.00 15.00% £126 £6 5.00% -$51.60 -10.75% $24.00 5.00% $99.60 20.75%

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