Assume you are a U.S. investor who is considering investments in the French (Stocks A and B)

Question:

Assume you are a U.S. investor who is considering investments in the French A and B) and Swiss C and D) stock markets. The world market risk premium is 6 percent. The currency risk premium on the Swiss franc is 1.25 percent, and the currency risk premium on the euro is 2 percent. The interest rate on one-year risk-free bonds is 3.75 percent in the United States. In addition, you are provided with the following information:

a. Calculate the expected return for each of the stocks. The U.S. dollar is the base currency.
b. Explain the differences in the expected returns of the four stocks in terms of BÏ‰ Î³‚¬, and Î³sFr.,..

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...