Standard deviation of pound-denominated return

Reference no: EM131923420

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 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 ______% ??

Reference no: EM131923420

Questions Cloud

What the differences are between leadership and authority : Discuss what the differences are between leadership and authority? What are the differences between informal and formal authority?

What conditions can rate of return to schooling be estimated : Discuss how differences in discount rates or in ability across workers lead? Under what conditions can the rate of return to schooling be estimated?

How many days would it take for the company to collect : A wholesale Fabric Company estimates its average account receivable at $63,000 while its book shows $472,500 in credit sales.

How much income will you need to earn : After you retire, you want to be able to earn at least $50,000 per year in 2014 dollars. How much income will you need to earn in 2054 dollars?

Standard deviation of pound-denominated return : 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.

Present value and future value : Your response should be based on what you know about present value and future value as well as include your personal opinion.

How the present value of future income payment is calculated : Discuss how the present value of a future income payment is calculated. Derive the stopping rule for investments in education.

Capital in percent of risk-weighted assets : What is the bank's Tier 1 capital in percent of risk-weighted assets, to the nearest 0.01%? (E.g., if your answer is 5.753%, record it as 5.75.)

What motives do economists typically assign to workers : What motives do economists typically assign to workers and firms? Why do we need a theory to understand real-world labor market problems?

User Account

All Pages