Assume that you have invested $100,000 in the stocks of a European company. When purchased, the stock's share price and the exchange rate were €50 and €0.50/$1.00 respectively. When the stocks were sold, one year after the purchase date, the stock's share price and the exchange rate were €60 and €0.64/$1.00.

 If you had hedged the foreign exchange risk of the equities by selling €55,000 forward at the forward exchange rate of €0.55/$1.00, what would be the annual percentage rate of return of your entire investment in terms of US dollars?

Answer rating: 100% (QA)

To calculate the annual percentage rate of return of your entire investment in terms of US dollars you need to consider the initial investment the ret... View the full answer