A US investor just bought one share of Heineken stock for 200 euros when the dollar/euro spot exchange rate was \(\$ 1.20 / €\). The investor expects the stock to pay a dividend worth 5 euros and to appreciate by \(10 \%\) one year from now.

a. Calculate the one-year expected rate of return on the stock for an investment made in euros.

b. Calculate the possible one-year expected rates of return on the stock in terms of a dollar investment. Assume possible end-ofthe-year exchange rates of \(\$ 1.05 / €, \$ 1.10 / €, \$ 1.15 / €, \$ 1.20 / €\), and \(\$ 1.25 / €\).

c. If the US risk-free rate were \(7 \%\) (annual) and the Netherlands risk-free rate on euros were \(5 \%\), what would be the one-year

forward rate a bank could provide the investor if it provides forward contracts based on the IRPT?

d. What would be the investor's possible expected rates of return if she hedged the dollar price of the stock ( \(€_{200}\) ) by going short in a forward contract as determined by the IRPT? Evaluate at possible exchange rates of \(\$ 1.05 / €, \$ 1.10 / €\), \(\$ 1.15 / €, \$ 1.20 / €\), and \(\$ 1.25 / €\).