Suppose a us investor wants to invest in a british

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46. Suppose a U.S. investor wants to invest in a British firm currently selling for ₤50 per share. The investor has $7,000 to invest, and the current exchange rate is $1.40/₤. After 1 year, the exchange rate is unchanged and the share price is ₤55. What is the dollar-denominated return? ₤55 × 100 × 1.40 = $7,700 (7,700/7,000) - 1 = 1.10 - 1 = 10% AACSB: Analytical Thinking Blooms: Apply Difficulty: 2 Medium Learning Objective: 19-02 Formulate hedge strategies to offset the currency risk involved in international investments. Topic: Risk Factors in International Investing
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