A year ago, a Swiss investor bought a 1-year U.S. Treasury security at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar. What is the rate of return to the Swiss investor? you must explain your approach to solve the problem in writing and explain the effect of exchange rate on the rate of return.

A year ago, a Swiss investor bought a 1-year U.S. Treasury security at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar. What is the rate of return to the Swiss investor? you must explain your approach to solve the problem in writing and explain the effect of exchange rate on the rate of return.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 44QA

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Similar questions

Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% against the dollar, how many francs would a dollar buy tomorrow?
A year ago, a Swiss investor bought a 1-year U.S. Treasury security at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar. What is the rate of return to the Swiss investor? You must explain your approach to solve the problem in writing and explain the effect of exchange rate on the rate of return.
A year ago, a Swiss investor bought a 1-year U.S. Treasury security at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar. What is the rate of return to the Swiss investor? (You must explain your approach to solve the problem in writing and explain the effect of exchange rate on the rate of return. No credit is given without the explanation.)
Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.4200 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.3240 Swiss francs per dollar. What is the nominal annual rate of return to the Swiss investor?