Performance Attribution: Simple Question capital, holding, currency

Iginla2010

You are an American with a holding in Japan that moved up in value from 100 to 125 CAD and at the same time the Japanese currency depreciated by 10%. (100 JPY/USD to 90 JPY/USD)

State what are the:

Total Return
Local Return
Return segmented by capital gains, currency and yield.

mar350

june2009 thats why I posted this question because I made the same mistake just now. You got caught in my little trap haha.

At least now we will both not do that on the exam!

Unforseen

deriv108 Wrote:
-------------------------------------------------------
> Paraguay Wrote:
> --------------------------------------------------
> -----
> > deriv108 Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > You are an American with a holding in Japan
> > that
> > > moved up in value from 100 to 125 JPY and at
> > the
> > > same time the Japanese currency depreciated
> by
> > > 10%. (100 JPY/USD to 110 JPY/USD)
> > >
> > > State what are the:
> > >
> > > Total Return
> > > Local Return
> > > Return segmented by capital gains, currency
> and
> > > yield.
> > >
> > > Total return:
> > > R=(125/100)*[(1/110)/(1/100)]-1=1.136-1=13.6%
> > > Local return=125/100-1=25%
> > >
> > > R(cg)=25%
> > > R(currency)=13.6%-25%=-11.4%
> > > R(yield)=0
> >
> > I hate their rounding, it is so very
> inconsistent.
> >
> >
> > In 2000 exam they had a PV factor that was
> taken
> > out 9 places. 9 places. At least 2 places
> after
> > the decimal seems logical however.
>
> Agreed...I believe your approach is much faster,
> but it's too late for me to learn your way to
> solve this kind of problem. The result look the
> same.

As long as you know how to get the answer that is all that matters.

IAmNeil

FML I suck at this.

When do we use that lovely formula for total return????

local return + foreign currency appreciation + (local ret*foreign currency)

seems like this would have been the question for that....

25% + -10% + (.25*-.1)

ll11

BTW, 100 JPY/USD to 110 JPY/USD ==>

JPY's depreciation: 100/110-1 = -9.1%, which is not exactly -10%.

Currency question could be very tricky, like this one.

infinitybenzo

Paraguay Wrote:
-------------------------------------------------------
> deriv108 Wrote:
> --------------------------------------------------
> -----
> > You are an American with a holding in Japan
> that
> > moved up in value from 100 to 125 JPY and at
> the
> > same time the Japanese currency depreciated by
> > 10%. (100 JPY/USD to 110 JPY/USD)
> >
> > State what are the:
> >
> > Total Return
> > Local Return
> > Return segmented by capital gains, currency and
> > yield.
> >
> > Total return:
> > R=(125/100)*[(1/110)/(1/100)]-1=1.136-1=13.6%
> > Local return=125/100-1=25%
> >
> > R(cg)=25%
> > R(currency)=13.6%-25%=-11.4%
> > R(yield)=0
>
> I hate their rounding, it is so very inconsistent.
>
>
> In 2000 exam they had a PV factor that was taken
> out 9 places. 9 places. At least 2 places after
> the decimal seems logical however.

Agreed...I believe your approach is much faster, but it's too late for me to learn your way to solve this kind of problem. The result look the same.

thommo77

(125/110 - 100/100) / 100/100 = 13.636

Return Local (125/100 = 25%)
Currency Return (1/110 - 1/100 = -9.1%)

Contribution effects = -.091(1.25) = -11.36

25 - 9.1 - 2.27 = 13.63%.
or
25 - 11.36 = 13.63%

Final answer.



Edited 1 time(s). Last edit at Friday, May 27, 2011 at 01:47PM by Paraguay.

liangfeng

You are an American with a holding in Japan that moved up in value from 100 to 125 JPY and at the same time the Japanese currency depreciated by 10%. (100 JPY/USD to 110 JPY/USD)

State what are the:

Total Return
Local Return
Return segmented by capital gains, currency and yield.

Total return: R=(125/100)*[(1/110)/(1/100)]-1=1.136-1=13.6%
Local return=125/100-1=25%

R(cg)=25%
R(currency)=13.6%-25%=-11.4%
R(yield)=0

PalacioHill

deriv108 Wrote:
-------------------------------------------------------
> You are an American with a holding in Japan that
> moved up in value from 100 to 125 JPY and at the
> same time the Japanese currency depreciated by
> 10%. (100 JPY/USD to 110 JPY/USD)
>
> State what are the:
>
> Total Return
> Local Return
> Return segmented by capital gains, currency and
> yield.
>
> Total return:
> R=(125/100)*[(1/110)/(1/100)]-1=1.136-1=13.6%
> Local return=125/100-1=25%
>
> R(cg)=25%
> R(currency)=13.6%-25%=-11.4%
> R(yield)=0

I hate their rounding, it is so very inconsistent.

In 2000 exam they had a PV factor that was taken out 9 places. 9 places. At least 2 places after the decimal seems logical however.

Valores

I came up with the same thing:

Total Return = 13.6%
Local Return = 25%
Return segmented by capital gains, currency and yield.

Cap gains = 25%
Yield = 0%
Currency = 13.6 - 25 = -11.4%