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QUESTION
Clara Gardner has just sold 100 shares of BMW, that she purchased for 75 per share a year ago, for 85 per share. The exchange rate is $1.15/ now and...
Ms. Clara Gardner has just sold 100 shares of BMW, that she purchased for €75 per share a year ago, for €85 per share. The exchange rate is $1.15/€ now and was $1.28/€ a year ago. To hedge against the exchange rate uncertainty, she sold €7,500 (the principal amount) forward at the forward rate of $1.22/€. What is the rate of return in dollar terms from this German investment?
