1. A U.S. investor buys a French bond as a passive investor and holds it for one year. If the value of the bond increases by 3% and the exchange rate of the U.S. dollar goes from 1 euro to 1.1 euros in that year, how much has the U.S. investor earned on the French bond?
a. 3%
b. 13.3%
c. 13%
d. 13.5%
2. Money Corp. used a forward hedge to hedge its payables of Malaysian ringgit (MYR) 1,000,000. The forward rate was $0.22. On the day Money Corp. paid the MYR, the spot rate was $0.20/MYR. The real cost of hedging the payable was:
a. $7,500.
b. $7,500.
c. $20,000
d. none of these