1. Assume that you have invested $100,000 in British equities. When purchased, the stock's price and the exchange rate were £50 and £0.75/$1.00 respectively. At selling time, one year after purchase, they were £60 and £0.80/$1.00. If the investor had sold £50,000 forward at the forward exchange rate of £0.70/$1.00. What would the dollar rate of return be?
2. Emerald Energy is an oil exploration and production company that trades on the London stock market. Assume that when purchased by an international investor the stock's price and the exchange rate were £10 and £0.75/$1.00 respectively. At selling time, one year after the purchase date, they were £12 and £0.81/$1.00. What is the investor's annual percentage rate of return in terms of the U.S. dollars?