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How much of this would have been lost due to exposure

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Question - Suppose you wish to invest in stock in Microsoft which is listed on the NY stock exchange. the current exchange rate is ZAR17, 5 per USD. Assume that the price level for a typical consumption basket in the SA is 3 times the same consumption basket in the USA. One year the price levels SA has risen 5% while the price level in the USA has risen by 2%. The new exchange rate is UDS 0,0565 per ZAR 1. If the year 1 return on your investment in Microsoft was 6%. How much of this would have been lost due to exposure to foreign currency risk. Support your answer with appropriate calculation and an explanation.

Reference no: EM132615768

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