Now suppose the investor in Problem 3 also sells forward 5,000 at a forward exchange rate of

Question:

Now suppose the investor in Problem 3 also sells forward £5,000 at a forward of $2.10/£.
a. Recalculate the dollar-denominated returns for each scenario.
b. What happens to the standard deviation of the dollar-denominated return? Compare it to both its old value and the standard deviation of the pound-denominated return.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...