上一主题:Portfolio Management and Wealth Planning【 Reading 43】
下一主题:Portfolio Management and Wealth Planning【Session17 - Reading 41】
返回列表 发帖

Portfolio Management and Wealth Planning【Session17 - Reading 42】

FQ global fund is a US fund with investments in European equity and was valued at 102 million as of January 1, 2006. During the first quarter of 2006, dividend income paid out by the fund was 2.3 million. The fund was valued at 105.10 million as of March 31, 2006. During the quarter, the Euro appreciated by 2% against the U.S. Dollar. What is the dividend yield on the fund in local currency?
A)
3.10%.
B)
2.25%.
C)
3.04%.



Dividend yield in local currency = 2.3/102 = 2.25%.

FQ global fund is a US fund with investments in European equity and was valued at 102 million as of January 1, 2003. During the first quarter of 2003, dividend income paid out by the fund was 2.3 million. The fund was valued at 105.10 million as of March 31, 2003. During the quarter, the Euro appreciated by 2% against the US Dollar. What is the total return on the fund in local and home currencies?
A)
5.29%; 7.40%.
B)
5.10%; 7.10%.
C)
3.10%; 5.10%.


Total return in local currency = Capital gains yield +Dividend yield

= [(105.10/102) – 1] + (2.3/102)

3.04 + 2.25 = 5.29%

Total return in home currency = Capital gains yield + Dividend yield + Currency effect


Currency effect = ej × (1 + CGj + Dj) = 0.02 × (1 + 0.0304 + 0.0225) = 0.0211 or 2.11%


Total return in home currency = 5.29% + 2.11% = 7.40%

TOP

FQ global fund is a US fund with investments in European equity and was valued at 102 million Euros as of January 1, 2003. During the first quarter of 2003, dividend income paid out by the fund was 2.3 million Euros. The fund was valued at 105.10 million Euros as of March 31, 2003. During the quarter, the Euro appreciated by 2% against the US Dollar. What is the capital gains yield on the fund in local currency?
A)
3.04%.
B)
5.10%.
C)
3.10%.



Capital gains yield in local currency = (105.10/102) – 1 = 3.04%.

TOP

Which of the following is the most likely method of hedging currency risk?
A)
Selling a futures currency contract.
B)
Selling a forward currency contract.
C)
Purchasing a forward currency contract.



Currency risk can be hedged using either forward or futures currency contracts with the most prevalent method being selling a forward contract. If a manager purchased a foreign asset then they are long the foreign currency and if they believe it will depreciate in the future then by selling a forward contract on the depreciating foreign currency this will result in a gain on the short position.

TOP

返回列表
上一主题:Portfolio Management and Wealth Planning【 Reading 43】
下一主题:Portfolio Management and Wealth Planning【Session17 - Reading 41】