Case Scenario:
Quincy has recently been hired by an international investment firm that has offices in both London and New York.
His boss has asked that he look into investing some of the firm's U.S.-based funds into a British company that currently sells at 80 pounds sterling (GBP) per share. Quincy's boss has limited his investable funds initially to $100,000. The current exchange rate between U.S. dollars (USD) and GBP is 2USD/1GBP.
Q1. Given the above scenario, how many shares would Quincy be able to purchase?
Q2. Calculate the different rates of return and repatriated returns in the following table:
............................................................................................................USD Denominated Return
Price Per Share (GBP).....GBP Based Return.....................1.80USD/GBP.......2 USD/GBP......2.20 USD/GBP
..........70
..........80
..........90
Q3. Explain why the results vary so much.
Q4. How do the exchange rates vary the results more than expected here?