Note on Exchange Purchase for portfolio

# Note on Exchange Purchase for portfolio - CN will now buy...

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Note on Exchange Purchase for portfolio. This note corrects the portfolio error I made in class today 3-1-2011. The key is to put \$100,000 US in as a negative # as you are selling \$US to buy Canadian \$’s. Data on 3-1-2011 the US/CN exchange rate is currently \$ US 1 = \$ CN .9748 (meaning \$ CN 1= \$ US 1.0258), you can purchase \$ CN with US \$’s if you believe the \$CN will rise in value relative to the \$US. I assume for teaching purposes that \$ CN /\$ US on March 15 will be 1/1.05 = .9524. Thus in your portfolio: take \$ US 100,000 and buy \$ CN 97,480. Then, if the \$ CN appreciates in value each \$
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Unformatted text preview: CN will now buy more than \$ US 1.0258, say \$ US 1.05. So in your portfolio you enter the following in the respective columns: Currency Open Date Open EX Cash Out/In Current EX/ EX at Close Close Date Current Total Profit (Loss) %ROI \$ Cn 3/1/2011 \$CN / \$ US (\$100,000) \$CN/ \$US \$ Cn 3/15/2011 0.9748 (\$100,000.00) 0.9524 3/15/2011 \$102,354.10 \$2,354.10 2.35% Currency Open Date Open EX Cash Out/In Current EX/ EX at Close Close Date Current Total Profit (Loss) \$ Cn 3/1/2011 0.9748 (\$100,000.00) 0.9524 3/15/2011\$102,354.10 \$2,354.10...
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