A Sweden-based fund is considering investing in 1-year savings in the US that give a return of 10%. The spot exchange rate SEK / USD is currently 10 SEK / USD but is expected to be 9 SEK / USD in a year. The investment amount the fund intends to invest in the USA is SEK 100 million. A) Calculate the expected return for the 1-year savings in SEK. B) Assume that the spot exchange rate at the future date will not be SEK 9 / USD but instead SEK 9.50 / USD . What will be the return in SEK from the 1-year savings?

A Sweden-based fund is considering investing in 1-year savings in the US that give a return of 10%. The spot exchange rate SEK / USD is currently 10 SEK / USD but is expected to be 9 SEK / USD in a year. The investment amount the fund intends to invest in the USA is SEK 100 million. A) Calculate the expected return for the 1-year savings in SEK. B) Assume that the spot exchange rate at the future date will not be SEK 9 / USD but instead SEK 9.50 / USD . What will be the return in SEK from the 1-year savings?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter14: Multinational Capital Budgeting

Section: Chapter Questions

Problem 22QA

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